IDEAS home Printed from https://ideas.repec.org/a/uwp/jhriss/v57y2022isps87-s110.html
   My bibliography  Save this article

Labor Market Competition and Employment Adjustment over the Business Cycle

Author

Listed:
  • Douglas A. Webber

Abstract

Using linked employer–employee data that covers the majority of U.S. employment, I examine how frictions in the labor market have evolved over time. I estimate that the labor supply elasticity to the firm declined significantly (1.20–1.01) since the late 1990s, with the steepest declines occurring during the financial crisis. I find that this decline in labor market competition led to at least a 4 percent drop in earnings for the average worker. I also find evidence that relatively monopsonistic firms smooth their employment behavior, growing at a rate lower than relatively competitive firms in good economic climates and slightly higher during poor economic climates. This conforms with the predictions of recent macroeconomic search models that suggest frictions in the economy may actually reduce employment fluctuations due to adjustment costs associated with hiring and laying off workers.

Suggested Citation

  • Douglas A. Webber, 2022. "Labor Market Competition and Employment Adjustment over the Business Cycle," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 87-110.
  • Handle: RePEc:uwp:jhriss:v:57:y:2022:i:s:p:s87-s110
    Note: DOI: 10.3368/jhr.monopsony.0119-9954R1
    as

    Download full text from publisher

    File URL: http://jhr.uwpress.org/cgi/reprint/57/S/S87
    Download Restriction: A subscripton is required to access pdf files. Pay per article is available.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bassier, Ihsaan, 2023. "Firms and inequality when unemployment is high," Journal of Development Economics, Elsevier, vol. 161(C).
    2. David Autor & Arindrajit Dube & Annie McGrew, 2023. "The Unexpected Compression: Competition at Work in the Low Wage Labor Market," NBER Working Papers 31010, National Bureau of Economic Research, Inc.
    3. Christian Bredemeier & Babette Jansen & Roland Winkler, 2023. "Labor Market Power and the Effects of Fiscal Policy," Jena Economics Research Papers 2023-015, Friedrich-Schiller-University Jena.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uwp:jhriss:v:57:y:2022:i:s:p:s87-s110. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: http://jhr.uwpress.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.