UC Berkeley

An important fact that has emerged from the past decade of research in labor economics is that the identity of a worker's employer is an important determinant of their labor market outcomes. More recent work in the field has emphasized a correlation between consolidation of industries and worse outcomes for workers employed in those industries. Both of these findings are consistent with employers' having substantive wage-setting power in the labor market, a consideration that is at odds with standard competitive models of labor markets.

This dissertation contributes to the field of labor economics by providing empirical evidence about how mergers and acquisitions --- events that lead to changes in the identity of a worker's employer and which tend to increase the concentration of an industry --- affect labor markets. I do so in two complementary ways.

In the first chapter, which was coauthored with Joerg Heining of the Institute for Employment Research (IAB) in Germany, I use matched employer-employee data from West Germany to study how acquisitions --- specifically the acquisition of an establishment by another similar establishment close by --- affect workers. Using an event study framework with a control group of workers at unaffected plants, I find that acquisitions lead to employment losses for workers initially employed at the acquired (or ``target'') firm, mainly associated with labor force withdrawals by older female workers. At the same time I find evidence of a rise in wages for workers initially employed at targets and at the acquiring (or ``buyer'') firm who remain with the combined enterprise, concentrated among lower-wage workers. I interpret these findings as suggesting that consolidations lead to a reduction in overall employment but a rise in rents per worker that lead to a pattern of losers and winners in the labor market. The contribution of this chapter is that it is the first study to identify establishment acquisitions and their impacts on workers who are directly impacted by them.

In the second chapter, I consider how merger and acquisition activity affects local labor market aggregates. I examine how merger-driven consolidation of hospitals in different local labor markets in the United States affected the wage and employment growth of Registered Nurses (RNs). This chapter finds that MSAs where there was merger activity had higher rates of growth in hospital market concentration than markets that did not. I find that the reduced form relationship between the presence of merger activity and changes in the average RN wage in each MSA indicates that merger activity is also associated with lower rates of wage growth for nurses. These results are consistent with prior research indicating that merger-driven consolidation depresses local labor market-level wage growth. The contribution of this chapter is to measure concentration, mergers, and labor market data for a specific profession in the United States.

The empirical results of both chapters are consistent with employers' exercising some degree of wage-setting power in labor markets.