Essays on labour market power

This thesis consists of three essays examining the causes and consequences of labour market power. In the first chapter, I develop a tractable model of entrepreneurship with monopsonistic labour markets and endogenous technology adoption, offering a novel perspective on the general equilibrium effects of imperfect competition. By reducing wages below the competitive level, labour market power increases self-selection into entrepreneurship, reducing average firm size and, thus, limiting the diffusion of fixed cost technologies. The proposed theory generates a set of testable predictions, validated with novel evidence from Italian microdata. Calibrating the model with estimates of wage markdowns and survey data on IT adoption reveals substantial losses in aggregate productivity. The second chapter — joint with Tito Boeri, Peter John Lambert, and Paolo Naticchioni — studies the causal impact of the diffusion of remote work on labour market power, connecting to an extensive literature which highlights distaste for commuting as a key source of rent extraction for local employers. The analysis combines job postings, administrative records, and financial statements. Exploiting the heterogeneity in shifts to remote work across occupations (instrumented with shifts observed abroad) and the heterogeneity in occupational shares across commuting zones and industries, we implement a shift-share design and identify a significant effect of remote work on labour market competition. Finally, the last chapter — joint with Matthias Mertens — explores firm heterogeneity in market power. Combining financial statements with survey data on firm-level prices, we find that larger firms exhibit lower markups, although they are overcompensated by substantially higher wage markdowns. We explain our divergence from prior studies by showing how labour market power critically distorts markup estimates.