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Estimating the Firm’s Labor Supply Curve in a “New Monopsony” Framework: School Teachers in Missouri

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  • Michael R. Ransom

    (Brigham Young University)

  • David P. Sims

    (Brigham Young University)

Abstract

In the context of certain dynamic models of monopsony, 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. Using this property, we estimate the average labor supply elasticity to public school districts in Missouri. We take advantage of the plausibly exogenous variation in pre-negotiated district salary schedules to instrument for actual salary. Instrumental variables estimates lead to a labor supply elasticity estimate of about 3.65, suggesting the presence of significant market power for school districts, especially over more experienced teachers. This is partially explained by institutional features of the teacher labor market.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 1108.

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Date of creation: Dec 2008
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Handle: RePEc:pri:indrel:dsp011831cj94z

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Keywords: monopsony papers; labor supply elasticity; public schools; Missouri;

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Cited by:
  1. Depew, Briggs & Norlander, Peter & Sorensen, Todd A., 2013. "Flight of the H-1B: Inter-Firm Mobility and Return Migration Patterns for Skilled Guest Workers," IZA Discussion Papers 7456, Institute for the Study of Labor (IZA).
  2. Webber, Douglas A., 2013. "Firm Market Power and the Earnings Distribution," IZA Discussion Papers 7342, Institute for the Study of Labor (IZA).
  3. Steffen Ahrens & Dennis Snower, 2012. "Envy, Guilt, and the Phillips Curve," CESifo Working Paper Series 3717, CESifo Group Munich.
  4. Manning, Alan, 2011. "Imperfect Competition in the Labor Market," Handbook of Labor Economics, Elsevier.
  5. Samuel Muehlemann & Paul Ryan & Stefan C. Wolter, 2013. "Monopsony Power, Pay Structure, and Training," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 66(5), pages 1097-1114, October.
  6. Depew, Briggs & Sørensen, Todd A., 2013. "The elasticity of labor supply to the firm over the business cycle," Labour Economics, Elsevier, vol. 24(C), pages 196-204.

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