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New Market Power Models and Sex Differences in Pay

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  • Michael R. Ransom

    (Brigham Young University and IZA)

  • Ronald L. Oaxaca

    (University of Arizona and IZA)

Abstract

In the context of certain general equilibrium search models, it is possible to infer the elasticity of labor supply to the firm from the elasticity of the quit rate with respect to the wage. We use this framework to estimate the elasticity of labor supply for men and women workers at a chain of grocery stores operating in the southwestern United States, identifying separation elasticities from differences in wages and separation rates across different job titles within the firm. We estimate elasticities of labor supply to the firm of about 2.7 for men and about 1.5 for women, suggesting significant wage-setting power for the firm. Since women have lower elasticities of labor supply to the firm, a Robinson-style monopsony model might explain lower relative pay of women in the grocery industry. The wage gaps we observe among workers in US retail grocery stores are close to what the monopsony model predicts for the elasticities we have estimated.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 1110.

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Date of creation: Dec 2008
Date of revision:
Handle: RePEc:pri:indrel:1110

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Keywords: monopsony papers; labor supply; grocery stores; elasticity;

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References

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  1. Michael Ransom & Ronald L. Oaxaca, 2005. "Intrafirm mobility and sex differences in pay," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(2), pages 219-237, January.
  2. Bowlus, Audra J, 1997. "A Search Interpretation of Male-Female Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 15(4), pages 625-57, October.
  3. William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March.
  4. Mortensen, Dale T. & Vishwanath, Tara, 1994. "Personal contacts and earnings : It is who you know!," Labour Economics, Elsevier, vol. 1(2), pages 187-201, March.
  5. Erling Barth & Harald Dale-Olsen, 1999. "Monopsonistic Discrimination and the Gender-Wage Gap," NBER Working Papers 7197, National Bureau of Economic Research, Inc.
  6. Hirsch, Boris & Schank, Thorsten & Schnabel, Claus, 2006. "Gender Differences in Labor Supply to Monopsonistic Firms : An Empirical Analysis Using Linked Employer-Employee Data from Germany," Discussion Papers 47, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  7. Bontemps, Christian & Robin, Jean-Marc & Van den Berg, Gerard J, 1999. "An Empirical Equilibrium Job Search Model with Search on the Job and Heterogeneous Workers and Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 1039-74, November.
  8. V. Bhaskar & Ted To, 1996. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Labor and Demography 9603001, EconWPA, revised 21 May 1996.
  9. Parsons, Donald O, 1972. "Specific Human Capital: An Application to Quit Rates and Layoff Rates," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1120-43, Nov.-Dec..
  10. Pencavel, John H, 1972. "Wages, Specific Training, and Labor Turnover in US Manufacturing Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 53-64, February.
  11. Francine D. Blau & Larry M. Kahn, 1981. "Race and sex differences in quits by young workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 34(4), pages 563-577, July.
  12. Peter Kuhn, 2004. "Is monopsony the right way to model labor markets? a review of Alan Manning's monopsony in motion," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 11(3), pages 369-378.
  13. 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, vol. 39(2), pages 257-73, May.
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Citations

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Cited by:
  1. Domenico Tabasso, 2011. "Temporary Contract and Monopsony Power in the UK Labour Market," Melbourne Institute Working Paper Series wp2011n16, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  2. Jeremy T. Fox, 2010. "Estimating the Employer Switching Costs and Wage Responses of Forward-Looking Engineers," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 357-412, 04.
  3. Rafael Lalive & Alois Stutzer, . "Approval of Equal Rights and Gender Differences in Well-Being," IEW - Working Papers 194, Institute for Empirical Research in Economics - University of Zurich.
  4. Julie L. Hotchkiss & Myriam Quispe-Agnoli, 2009. "Employer monopsony power in the labor market for undocumented workers," Working Paper 2009-14, Federal Reserve Bank of Atlanta.
  5. Ashenfelter, Orley & Farber, Henry & Ransom, Michael R., 2010. "Modern Models of Monopsony in Labor Markets: A Brief Survey," IZA Discussion Papers 4915, Institute for the Study of Labor (IZA).
  6. Kahn, Lawrence M., 2009. "Temporary Jobs and Job Search Effort in Europe," IZA Discussion Papers 4020, Institute for the Study of Labor (IZA).
  7. Torberg Falch, 2013. "Wages and Recruitment: Evidence from External Wage Changes," CESifo Working Paper Series 4078, CESifo Group Munich.
  8. Julie L. Hotchkiss & Myriam Quispe-Agnoli, 2008. "The labor market experience and impact of undocumented workers," Working Paper 2008-07, Federal Reserve Bank of Atlanta.

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