Understanding High-Wage Firms: Monopoly, Monopsony, and Bargaining Power

Abstract

I study how firm market power and worker bargaining power shape wages and welfare. Using French micro-data, I document patterns linking wages and firm market power that existing models cannot explain. A model in which firms produce vertically differentiated goods and share profits with workers explains those patterns. The model (i) reveals new challenges in estimating monopsony and bargaining power, proposing an alternative approach; (ii) shows that the pass-through of firm-specific shocks to wages depends on the type of shock; (iii) explains how markups shape firm wage premia; and (iv) formalizes how strengthening worker bargaining power affects wages and welfare.