Labour market and inequality
Working paper

Product market competition and the labour market - Evidence from South Africa

Francesco Amodio, Michele Di Maio, Yifan Li, and Patrizio Piraino
March 2020


We study the relationship between product market competition and labour market outcomes in South Africa. We combine firm-level data from tax records with individual-level data from the labour force survey. We estimate markups across sectors, and derive a measure of employment concentration in high-markup sectors across South African district municipalities.We then test whether individual labour market outcomes differ systematically in those district municipalities where employment is more concentrated in high-markup sectors. We find that higher employment concentration in high-markup sectors is associated with higher unemployment and lower likelihood of transitions from unemployment to employment. This is differentially more the case for non-White, lower educated, and young individuals. The relationship remains strong when conditioning on a rich set of individual- and district-level covariates, including employment concentration per se.