Labor Market Concentration during Industrialization
With Jakob Molinder, Johan Ericsson & Thor Berger
In this article we use new and detailed data on plant-level employment to calculate labor market concentration in manufacturing over the course of industrialization in Sweden (1863-1939). We calculate a Herfindahl-Hirschmann index for local and regional labor markets, showing that labor market concentration was very high at the start of industrialization, especially in smaller regions. Concentration declined across the board, and as migration accelerated from rural to urban areas, where labor markets were more competitive, an increased share of the population lived in a competitive labor market. We combine our data on concentration with individual-level data from the 1930 census to estimate the effect of concentration on incomes. We find that there’s a negative effect on total earnings that is both statistically and economically significant. The effect of labor market concentration on incomes was also heterogeneous across skill-groups. We document larger negative effects on incomes for high- and medium-skilled individuals than we do for low- and unskilled individuals.