Posted by Social Science Research Network
By Suresh Naidu, Eric A. Posner, E. Glen Weyl
Recent research indicates that labor market power has contributed to wage inequality and economic stagnation. Although the antitrust laws prohibit firms from restricting competition in labor markets like in product markets, the government does little to address the labor market problem and private litigation has been rare and mostly unsuccessful. The reason is that the analytic methods for evaluating labor market power in antitrust contexts are primitive, far less sophisticated than the legal rules used to judge product market power. To remedy this asymmetry, we propose methods for judging the effects of mergers on labor markets. We also extend our approach to other forms of anticompetitive practices undertaken by employers against workers. We highlight some arguments and evidence indicating that market power may be even more important in labor than in product markets.