Employer Market Power in Silicon Valley

Authors

Matthew Gibson, Williams College and IZAFollow

Series

Upjohn Institute working paper ; 24-398

DOI

10.17848/wp24-398

Issue Date

March 2024

Abstract

Adam Smith alleged that employers often secretly combine to reduce labor earnings. This paper examines an important case of such behavior: illegal no-poaching agreements through which information-technology companies agreed not to compete for each other’s workers. Exploiting the plausibly exogenous timing of a U.S. Department of Justice investigation, I estimate the effects of these agreements using a difference-in-difference design. Data from Glassdoor permit the inclusion of rich employer- and job-level controls. On average the no-poaching agreements reduced salaries at colluding firms by 5.6 percent, consistent with considerable employer market power. Stock bonuses and job satisfaction were also negatively affected.

Sponsorship

W.E. Upjohn Institute for Employment Research Early Career Research Award No. 20-158-06

Subject Areas

LABOR MARKET ISSUES; Wages, health insurance and other benefits; Inequality; Nonwage benefits