Labour market concentration, wages and job security in Europe

We investigate the impact of labour market concentration on two dimensions of job
quality, namely wages and job security. We leverage rich administrative linked employeremployee data from Denmark, France, Germany, Italy, Portugal and Spain in the 2010s
to provide the first comparable cross-country evidence in the literature. Controlling for
productivity and local product market concentration, we show that the elasticities of
wages with respect to labour market concentration are strikingly similar across countries:
increasing labour market concentration by 10% reduces wages by 0.19% in Germany,
0.22% in France, 0.25% in Portugal and 0.29% in Denmark. Regarding job security, we
find that an increase in labour market concentration by 10% reduces the probability of
being hired on a permanent contract by 0.46% in France, 0.51% in Germany and 2.34% in
Portugal. While not affecting this probability in Italy and Spain, labour market concentration
significantly reduces the probability of being converted to a permanent contract once hired
on a temporary one. Our results suggest that considering only the effect of labour market
concentration on wages underestimates its overall impact on job quality and hence the
resulting welfare loss for workers