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Bidding for Talent: A Test of Conduct in a High-Wage Labor Market

Author

Listed:
  • Roussille, Nina

    (MIT)

  • Scuderi, Benjamin

    (UC Berkeley)

Abstract

We develop a procedure for adjudicating between models of firm wage-setting conduct. Using data on workers' choice sets and decisions over real jobs from a U.S. job search platform, we first estimate workers' rankings over firms' non-wage amenities. We document three key findings: 1) On average, workers are willing to accept 12.3% lower salaries for a 1-S.D. improvement in amenities. 2) Between-worker preference dispersion is equally large, indicating that preferences are not well-described by a single ranking. 3) High-paying firms have better amenities. Following the modern IO literature, we use these estimates to formulate a test of conduct based on exclusion restrictions. Oligopsonistic models incorporating strategic interactions between firms and tailoring of wage offers to workers' outside options are rejected in favor of simpler monopsonistic models featuring near-uniform markdowns. Misspecification has meaningful consequences: while our preferred model predicts average markdowns of 19.5%, others predict average markdowns as large as 26.6%.

Suggested Citation

  • Roussille, Nina & Scuderi, Benjamin, 2023. "Bidding for Talent: A Test of Conduct in a High-Wage Labor Market," IZA Discussion Papers 16352, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16352
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    References listed on IDEAS

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    1. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(3), pages 967-1015.
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    3. Dankmar Böhning & Bruce Lindsay, 1988. "Monotonicity of quadratic-approximation algorithms," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 40(4), pages 641-663, December.
    4. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
    5. Donald, Stephen G. & Paarsch, Harry J., 2002. "Superconsistent estimation and inference in structural econometric models using extreme order statistics," Journal of Econometrics, Elsevier, vol. 109(2), pages 305-340, August.
    6. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    7. Douglas Rivers & Quang Vuong, 2002. "Model selection tests for nonlinear dynamic models," Econometrics Journal, Royal Economic Society, vol. 5(1), pages 1-39, June.
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    Cited by:

    1. Callaci, Brian & Gibson, Matthew & Pinto, Sergio & Steinbaum, Marshall & Walsh, Matt, 2023. "The Effect of Franchise No-Poaching Restrictions on Worker Earnings," IZA Discussion Papers 16330, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    wage-setting conduct; markdowns; monopsony;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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