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Dynamic Monopsony: Evidence from a French Establishment Panel

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  • Fakhfakh, Fathi

    ()
    (University of Paris 2 - ERMES)

  • FitzRoy, Felix

    ()
    (University of St. Andrews)

Abstract

This paper uses a panel of about 6000 French establishments to test some implications of the modern theory of dynamic monopsony or upward sloping labour supply curves for average firm wages. Panel estimates provide strong evidence of a much larger long run employer size - wage effect (ESWE) than found previously, while controlling for worker quality and compensating differentials with lagged wages, and for profitability (rent sharing). Employment expansion also has a positive effect on wages, providing further evidence for upward sloping labour supply (as distinct from the effect of shocks in a perfectly competitive labour market).

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1622.

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Length: 23 pages
Date of creation: Jun 2005
Date of revision:
Publication status: published in: Economica, 2006, 73 (291), 533-545
Handle: RePEc:iza:izadps:dp1622

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Keywords: dynamic monopsony; firm-size wage effect; labour supply;

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References

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  1. Kenneth Burdett & Dale T. Mortensen, 1989. "Equilibrium Wage Differentials and Employer Size," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 860, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Simon Burgess & Julia Lane & David Stevens, 1996. "Job Flows, Worker Flows and Churning," Labor and Demography, EconWPA 9604004, EconWPA.
  3. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 29-51, July.
  4. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(5), pages 1027-59, October.
  5. Steve Bond & Clive Bowsher & Frank Windmeijer, 2001. "Criterion-based inference for GMM in autoregressive panel-data models," IFS Working Papers, Institute for Fiscal Studies W01/02, Institute for Fiscal Studies.
  6. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers, Institute for Fiscal Studies W95/17, Institute for Fiscal Studies.
  7. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High-Wage Workers and High-Wage Firms," CIRANO Working Papers, CIRANO 94s-23, CIRANO.
  8. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  9. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1992. "Wages, Profits and Rent-Sharing," NBER Working Papers 4222, National Bureau of Economic Research, Inc.
  10. Kenneth R. Troske & Kimberly Bayard, 1999. "Examining the Employer-Size Wage Premium in the Manufacturing, Retail Trade, and Service Industries Using Employer-Employee Matched Data," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 99-103, May.
  11. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 19(3), pages 321-340.
  12. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," NBER Working Papers 5067, National Bureau of Economic Research, Inc.
  13. Julia I. Lane & John C. Haltiwanger & James Spletzer, 1999. "Productivity Differences across Employers: The Roles of Employer Size, Age, and Human Capital," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 94-98, May.
  14. Arellano, M. & Honore, B., 2000. "Panel Data Models: Some Recent Developments," Papers, Centro de Estudios Monetarios Y Financieros- 0016, Centro de Estudios Monetarios Y Financieros-.
  15. Bewley, Truman F., 1998. "Why not cut pay?," European Economic Review, Elsevier, Elsevier, vol. 42(3-5), pages 459-490, May.
  16. repec:fth:inseep:9730 is not listed on IDEAS
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Cited by:
  1. Thierry Lallemand & Robert Plasman & François Rycx, 2005. "The establishment-size wage premium: evidence from European countries," DULBEA Working Papers, ULB -- Universite Libre de Bruxelles 05-07.RS, ULB -- Universite Libre de Bruxelles.
  2. G. Sulis, 2007. "What Can Monopsony Explain of the Gender Wage Differential in Italy?," Working Paper CRENoS 200713, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  3. Maritza López Novella & Salimata Sissoko, 2013. "Understanding wage determination in a multi-level bargaining system: a panel data analysis," Empirical Economics, Springer, Springer, vol. 44(2), pages 879-897, April.

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