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Timing "Disturbances" in Labor Market Contracting: Roth's Findings and the Effects of Labor Market Monopsony

  • George L. Priest
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    This paper addresses Alvin Roth's findings of market contracting at times earlier than optimal for market participants, which Roth describes as market "unraveling," a market failure he proposes to solve by designing centralized buyer-seller matching programs. This paper shows that, while Roth's engineering solutions are ingenious, the early contracting phenomena derive from labor market monopsony. Under monopsony, price is unavailable to clear the market; time of contract becomes the currency for working out market forces. Roth's matching serves to shore up the monopsony and would be unnecessary if the monopsony were removed; a superior solution is to end the monopsony. (c) 2010 by The University of Chicago. All rights reserved.

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    File URL: http://dx.doi.org/10.1086/650761
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    Article provided by University of Chicago Press in its journal Journal of Labor Economics.

    Volume (Year): 28 (2010)
    Issue (Month): 2 (04)
    Pages: 447-472

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    Handle: RePEc:ucp:jlabec:v:28:y:2010:i:2:p:447-472
    Contact details of provider: Web page: http://www.journals.uchicago.edu/JOLE/

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    1. 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.
    2. repec:pri:indrel:537 is not listed on IDEAS
    3. Beth Asch & Paul Heaton, 2008. "Monopsony and Labor Supply in the Army and Navy," Working Papers 1107, Princeton University, Department of Economics, Industrial Relations Section..
    4. Michael R Ransom & David P. Sims, 2010. "Estimating the Firm's Labor Supply Curve in a "New Monopsony" Framework: Schoolteachers in Missouri," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 331-355, 04.
    5. Torberg Falch, 2010. "The Elasticity of Labor Supply at the Establishment Level," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 237-266, 04.
    6. Roth, Alvin E & Xing, Xiaolin, 1994. "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, American Economic Association, vol. 84(4), pages 992-1044, September.
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