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Monopsony in Labor Markets: A Meta-Analysis

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  • Anna Sokolova
  • Todd Sorensen

Abstract

When jobs offered by different employers are not perfect substitutes, employers gain wage-setting power; the extent of this power can be captured by the elasticity of labor supply to the firm. The authors collect 1,320 estimates of this parameter from 53 studies. Findings show a prominent discrepancy between estimates of direct elasticity of labor supply to changes in wage (smaller) and the estimates converted from inverse elasticities (larger), suggesting that labor market institutions may rein in a substantial amount of firm wage-setting power. This gap remains after they control for 22 additional variables and use Bayesian Model Averaging and LASSO to address model uncertainty; however, it is less pronounced for studies employing an identification strategy. Furthermore, the authors find strong evidence that implies the literature on direct estimates is prone to selective reporting: Negative estimates of the elasticity of labor supply to the firm tend to be discarded, leading to upward bias in the mean reported estimate. Additionally, they point out several socioeconomic factors that seem to affect the degree of monopsony power.

Suggested Citation

  • Anna Sokolova & Todd Sorensen, 2021. "Monopsony in Labor Markets: A Meta-Analysis," ILR Review, Cornell University, ILR School, vol. 74(1), pages 27-55, January.
  • Handle: RePEc:sae:ilrrev:v:74:y:2021:i:1:p:27-55
    DOI: 10.1177/0019793920965562
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    More about this item

    Keywords

    monopsony model; labor supply; labor supply elasticities; meta-analysis;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods

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