Working Paper
Product market competition and the labour market

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.