This project investigates how worker bargaining power is shaped by labour market tightness. Our theoretical framework predicts that bargaining power emerges endogenously from market tightness: in tight markets, workers can reject low offers without fearing replacement. Conversely, high bargaining power reduces vacancy creation, generating cyclical dynamics between the two variables. Using matched employer-employee data combined with vacancy data, we aim to empirically test and quantify this relationship, and understand whether and to what extent declining market tightness has been a factor behind the observed decline in worker bargaining power over recent decades.
