To capture labor heterogeneity in productivity analysis, wage is used as a proxy variable for the efficiency unit of labor input. However, the marginal product of labor and wages could systematically diverge depending on the degree of competition in product and labor markets. Along these lines, this study examines the gap between the marginal product of labor, approximated by the fee charged by a temporary help agency, and wages paid to workers, drawn from administrative data compiled by the Temporary Help Agency of Japan. The analysis of establishment-level micro data reveals that the market is concentrated, and the gap between fees and wages is the largest in rural areas. Against several specifications, the estimation results are robust, indicating that people need to pay attention to the degree of market competition in productivity analysis.
