Concentration and mergers: evidence from Italian labor markets

This paper combines INPS workers’ records and the Zephyr archive to investigate the effects of horizontal mergers on labor market concentration and, in turn, the effect of concentration on wages, job security, and employment. By constructing a flow-based concentration index, I find substantial heterogeneity in concentration levels across different industries. I then employ a TSLS strategy based on the different exposures of industries to horizontal mergers. First-stage results confirm that mergers raise concentration, while the elasticity estimates range between -0.14 and -0.07 percentage points for wages and between -0.77 and -0.68 for hires. Overall, job security is not affected. However, the impact on both wages and job security is limited to women, with the magnitude of the estimates increasing in concentration levels. Overall, the paper provides evidence that horizontal mergers increase concentration, which in turn harms workers and employment.