Labour Market Power in Canada : Long-term Trends and Cyclical Dynamics (JMP)
Published:
This paper provides the first time-series analysis of labour market concentration in Canada, and proposes a novel approach to decomposing and explaining the underlying mechanisms. It shows that national concentration gradually declined from 2001 to 2019, while local concentration experienced a temporary rise of 14% during the Great Recession. Decomposition analysis reveals that the long-run decline reflects two offsetting forces: increased within-industry competition, which reduced concentration, and wage-bill shifts toward more concentrated sectors, which partially offset these gains. During the Great Recession, the pattern reverses at the local level: 68% of the increase in local concentration was driven by sectoral reallocation toward more concentrated industries. We then develop a calibrated TANK model with employer market power and demonstrate that fiscal expansions compress wage markdowns, increase the labour share, and markedly reduce consumption and income inequality between workers and capitalists.