Events

Prof. Michael Koch

Associate Professor

Aarhus University

This paper reveals a new determinant of markdowns at the firm level, namely the number of products a firm produces. Using rich matched employer-employee data on Danish manufacturing firms, we document a negative elasticity between wages and firm scope, which is of similar magnitude, but different sign, as the firm-size wage premium.  We rationalize this novel empirical result in a theoretical model where the multi-product nature of a firm is an amenity to workers due to internal job rotation. Hence, firms with a larger scope exercise greater monopsony power and offer lower wages. Our findings have significant implications for understanding labor market dynamics in times of rising concentration on large multi-product producers and for research in industrial organization.