Assoc. Prof. Gregory Veramendi, Ph.D.

Market Power in Labor Markets

Understanding how wages are determined when a worker is hired is key to understanding the sources of market power in labor markets. Firms often receive many applications for a single vacancy and interview multiple candidates before negotiating a job offer. Our framework allows us to study how wages are determined when there are multiple firms and, importantly, multiple workers at the bargaining table. Having more than two firms negotiating with the worker, improves the worker’s outside option. Similarly, allowing a firm to interview multiple workers, may improve the firm’s outside option, thus increasing its market power. There are two main mechanisms where firms’ outside options increase their market power when workers are considering a job-to-job move. First, a worker interviewing with a new hiring firm may receive a lower final wage offer if the hiring firm is also interviewing other workers with poor bargaining positions (e.g. they are unemployed). Second, a worker’s current firm may be less willing to offer a higher wage if they can replace the employed worker with workers they are already interviewing for an open vacancy. We develop and estimate a simultaneous search model with a finite number of firms, on-the-job search, and firm-specific non-wage amenities and decompose the importance of these mechanisms using Danish matched employer-employee data.

Dr. Veramendi is an applied economist who studies labor markets, human capital, and gender. His recent work on labor markets focuses on how wages are determined when there are many-to-many meetings. In other words, when firms are interviewing multiple workers and workers are interviewing with multiple firms. His recent work on human capital studies the dynamic complementarities between specialised investments in secondary education and college. Ongoing work studies the role of mental health as a form of human capital in educational decisions and labor markets. Finally, he studies differences in the behaviour and outcomes of men and women in educational attainment and the labor market.

Gregory Veramendi is an Associate Professor at the Department of Economics at Royal Holloway, University of London, having previously taught in the Department of Economics of the LMU and at Arizona State University. Dr. Veramendi is a Research Associate of Institute for Fiscal Studies, London as well as an Affiliate of the CESifo Research Network. He is an associate Editor at Journal of Political Economy Microeconomics (JPE Micro) and Journal of Human Capital. He was awarded a PhD as well as an MA in Economics from Northwestern University, and a PhD in Physics from the University of California at Berkeley.