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Labor Market Frictions and Moving Costs of the Employed and Unemployed

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  • Tyler Ransom

Abstract

Search frictions and switching costs may grant monopsony power to incumbent employers by reducing workers’ outside options. This paper examines the role of labor market frictions and moving costs in explaining worker flows across U.S. labor markets. Using data on non-college-educated workers from the Survey of Income and Program Participation (SIPP), I estimate a dynamic model of job search and location choice. I find that moving costs are substantial and that labor market frictions primarily inhibit the employed. Reducing these frictions would result in a higher wage elasticity of labor supply to the firm and could reduce employer monopsony power.

Suggested Citation

  • Tyler Ransom, 2022. "Labor Market Frictions and Moving Costs of the Employed and Unemployed," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 137-166.
    • Handle: RePEc:uwp:jhriss:v:57:y:2022:i:s:p:s137-s166
    Note: DOI: 10.3368/jhr.monopsony.0219-10013R2
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    Cited by:

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    2. Luan, Mengna & Tao, Zhigang & Yuan, Hongjie, 2023. "Monopsony power and workers’ switching costs: Evidence from hospitals in China," Economics Letters, Elsevier, vol. 233(C).
    3. Riley Wilson, 2023. "The Isolated States of America: Home State Bias and the Impact of State Borders on Mobility," CESifo Working Paper Series 10724, CESifo.
    4. Myongjin Kim & Qi Ge & Donggeun Kim, 2021. "Mergers and labor market outcomes in the US airline industry," Contemporary Economic Policy, Western Economic Association International, vol. 39(4), pages 849-866, October.
    5. Myrto Kalouptsidi & Paul T. Scott & Eduardo Souza-Rodrigues, 2020. "Linear IV Regression Estimators for Structural Dynamic Discrete Choice Models," Working Papers tecipa-674, University of Toronto, Department of Economics.
    6. 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.
    7. Berger, David & Hasenzagl, Thomas & Herkenhoff, Kyle & Mongey, Simon & Posner, Eric A., 2023. "Comments on the 2023 Draft Merger Guidelines: A Labor Market Perspective," IZA Discussion Papers 16401, Institute of Labor Economics (IZA).
    8. Ashenfelter, Orley & Jurajda, Štepán, 2024. "The U.S. Low-Wage Structure: A McWage Comparison," IZA Discussion Papers 17142, Institute of Labor Economics (IZA).
    9. Marco Caliendo & Steffen Künn & Robert Mahlstedt, 2022. "The Intended and Unintended Effects of Promoting Labor Market Mobility," CEPA Discussion Papers 42, Center for Economic Policy Analysis.
    10. Kalouptsidi, Myrto & Scott, Paul T. & Souza-Rodrigues, Eduardo, 2021. "Linear IV regression estimators for structural dynamic discrete choice models," Journal of Econometrics, Elsevier, vol. 222(1), pages 778-804.
    11. repec:rre:publsh:v:52:y:2022:i:2 is not listed on IDEAS
    12. Yu, Fan & Zheng, Shilin & Zheng, Shuhong & Guo, Chenhao, 2024. "Does carbon ETS affect the distribution of labor's slice of the factor income pie? From the low carbon transition perspective," Energy Economics, Elsevier, vol. 134(C).
    13. Tyler Ransom, 2021. "Selective Migration, Occupational Choice, and the Wage Returns to College Majors," Annals of Economics and Statistics, GENES, issue 142, pages 45-110.
    14. Joanna Venator, 2022. "Dual-Earner Migration Decisions, Earnings, and Unemployment Insurance," Boston College Working Papers in Economics 1052, Boston College Department of Economics.
    15. Sharon Traiberman, 2019. "Occupations and Import Competition: Evidence from Denmark," American Economic Review, American Economic Association, vol. 109(12), pages 4260-4301, December.
    16. Gendron-Carrier, Nicolas, 2023. "Prior Work Experience and Entrepreneurship: The Careers of Young Entrepreneurs," IZA Discussion Papers 16145, Institute of Labor Economics (IZA).
    17. Hervé, Justine, 2023. "Specialists or generalists? Cross-industry mobility and wages," Labour Economics, Elsevier, vol. 84(C).

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    More about this item

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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