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Monopsony in Movers: The Elasticity of Labor Supply to Firm Wage Policies

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  • Ihsaan Bassier
  • Arindrajit Dube
  • Suresh Naidu

Abstract

We estimate the impact of the firm component of hourly wage variation on separations from matched Oregon employer–employee data. We use both firm fixed effects estimated from a wage equation as well as a matched instrumental variable (IV) event study around employment transitions between firms. Separations decline with firm wage policies: the implied firm-level labor supply elasticities are around 4, consistent with recent quasi-experimental evidence, but three to four times larger than existing estimates using individual wages. We find that monopsonistic competition is pervasive, even in low-wage, high-turnover sectors, but with little heterogeneity by labor market concentration.

Suggested Citation

  • Ihsaan Bassier & Arindrajit Dube & Suresh Naidu, 2022. "Monopsony in Movers: The Elasticity of Labor Supply to Firm Wage Policies," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 50-86.
    • Handle: RePEc:uwp:jhriss:v:57:y:2022:i:s:p:s50-s86
    Note: DOI: 10.3368/jhr.monopsony.0319-10111R1
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    File URL: http://jhr.uwpress.org/cgi/reprint/57/S/S50
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    Citations

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    Cited by:

    1. Amodio, Francesco & Medina, Pamela & Morlacco, Monica, 2022. "Labor Market Power, Self-Employment, and Development," CEPR Discussion Papers 17543, C.E.P.R. Discussion Papers.
    2. Timothy Perri Perri, 2023. "The Death of Labor Market Competition Has Been Greatly Exaggerated," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 38(Summer 20), pages 39-54.
    3. Jose Garcia-Louzao & Alessandro Ruggieri, 2023. "Labor Market Competition and Inequality," CESifo Working Paper Series 10829, CESifo.
    4. Ihsaan Bassier, 2022. "Firms and inequality when unemployment is high," CEP Discussion Papers dp1872, Centre for Economic Performance, LSE.
    5. Bassier, Ihsaan & Manning, Alan & Petrongolo, Barbara, 2023. "Vacancy duration and wages," LSE Research Online Documents on Economics 121287, London School of Economics and Political Science, LSE Library.
    6. Bassier, Ihsaan, 2023. "Firms and inequality when unemployment is high," Journal of Development Economics, Elsevier, vol. 161(C).
    7. Nikhil Datta, 2023. "The measure of monopsony: the labour supply elasticity to the firm and its constituents," CEP Discussion Papers dp1930, Centre for Economic Performance, LSE.
    8. Bassier, Ihsaan & Manning, Alan & Petrongolo, Barbara, 2023. "Vacancy Duration and Wages," IZA Discussion Papers 16371, Institute of Labor Economics (IZA).
    9. Lachowska, Marta & Mas, Alexandre & Saggio, Raffaele & Woodbury, Stephen A., 2023. "Do firm effects drift? Evidence from Washington administrative data," Journal of Econometrics, Elsevier, vol. 233(2), pages 375-395.
    10. Haishan Yuan, 2023. "The Profit Paradox: How Thriving Firms Threaten the Future of Work," The Economic Record, The Economic Society of Australia, vol. 99(324), pages 136-139, March.
    11. Ihsaan Bassier & Alan Manning & Barbara Petrongolo, 2023. "Vacancy duration and wages," CEP Discussion Papers dp1943, Centre for Economic Performance, LSE.
    12. Datta, Nikhil, 2023. "The measure of monopsony: the labour supply elasticity to the firm and its constituents," LSE Research Online Documents on Economics 121312, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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