IDEAS home Printed from https://ideas.repec.org/p/cep/cepdps/dp1780.html
   My bibliography  Save this paper

The measure of monopsony

Author

Listed:
  • Monica Langella
  • Alan Manning

Abstract

There has been increasing interest in recent years in monopsony in labour market. This paper discusses how we can measure monopsony power combining insights from models based on both frictions and idiosyncrasies. It presents some evidence from the UK and the US about how monopsony power varies across the wage distribution within markets, over the business cycle and over time.

Suggested Citation

  • Monica Langella & Alan Manning, 2021. "The measure of monopsony," CEP Discussion Papers dp1780, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1780
    as

    Download full text from publisher

    File URL: https://cep.lse.ac.uk/pubs/download/dp1780.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Simon Jäger & Benjamin Schoefer & Jörg Heining, 2021. "Labor in the Boardroom," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(2), pages 669-725.
    2. Machin, Stephen & Bell, Brian & Bukowski, Pawel, 2018. "Rent Sharing and Inclusive Growth," CEPR Discussion Papers 13408, C.E.P.R. Discussion Papers.
    3. Steven Berry & Martin Gaynor & Fiona Scott Morton, 2019. "Do Increasing Markups Matter? Lessons from Empirical Industrial Organization," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 44-68, Summer.
    4. Thibaut Lamadon & Magne Mogstad & Bradley Setzler, 2022. "Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market," American Economic Review, American Economic Association, vol. 112(1), pages 169-212, January.
    5. Azar, José & Marinescu, Ioana & Steinbaum, Marshall & Taska, Bledi, 2020. "Concentration in US labor markets: Evidence from online vacancy data," Labour Economics, Elsevier, vol. 66(C).
    6. Alan Manning & Barbara Petrongolo, 2017. "How Local Are Labor Markets? Evidence from a Spatial Job Search Model," American Economic Review, American Economic Association, vol. 107(10), pages 2877-2907, October.
    7. Boris Hirsch & Elke J. Jahn & Alan Manning & Michael Oberfichtner, 2022. "The Urban Wage Premium in Imperfect Labor Markets," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 111-136.
    8. Gregor Jarosch & Jan Sebastian Nimczik & Isaac Sorkin, 2019. "Granular Search, Market Structure, and Wages," NBER Working Papers 26239, National Bureau of Economic Research, Inc.
    9. Arindrajit Dube & Laura Giuliano & Jonathan Leonard, 2019. "Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior," American Economic Review, American Economic Association, vol. 109(2), pages 620-663, February.
    10. Marinescu, Ioana & Ouss, Ivan & Pape, Louis-Daniel, 2021. "Wages, hires, and labor market concentration," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 506-605.
    11. David Card & Ana Rute Cardoso & Joerg Heining & Patrick Kline, 2018. "Firms and Labor Market Inequality: Evidence and Some Theory," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 13-70.
    12. Alan B. Krueger & Orley Ashenfelter, 2022. "Theory and Evidence on Employer Collusion in the Franchise Sector," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 324-348.
    13. Sabrina T Howell & J David Brown, 2023. "Do Cash Windfalls Affect Wages? Evidence from R&D Grants to Small Firms," The Review of Financial Studies, Society for Financial Studies, vol. 36(5), pages 1889-1929.
    14. Webber, Douglas A., 2015. "Firm market power and the earnings distribution," Labour Economics, Elsevier, vol. 35(C), pages 123-134.
    15. Raven Molloy & Christopher L. Smith & Riccardo Trezzi & Abigail Wozniak, 2016. "Understanding Declining Fluidity in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 183-259.
    16. 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.
    17. Kory Kroft & Yao Luo & Magne Mogstad & Bradley Setzler, 2020. "Imperfect Competition and Rents in Labor and Product Markets: The Case of the Construction Industry," NBER Working Papers 27325, National Bureau of Economic Research, Inc.
    18. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-139, March.
    19. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    20. Carl Shapiro, 2019. "Protecting Competition in the American Economy: Merger Control, Tech Titans, Labor Markets," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 69-93, Summer.
    21. Alan Manning, 2021. "Monopsony in Labor Markets: A Review," ILR Review, Cornell University, ILR School, vol. 74(1), pages 3-26, January.
    22. Arindrajit Dube & Jeff Jacobs & Suresh Naidu & Siddharth Suri, 2020. "Monopsony in Online Labor Markets," American Economic Review: Insights, American Economic Association, vol. 2(1), pages 33-46, March.
    23. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-947, October.
    24. Ihsaan Bassier & Arindrajit Dube & Suresh Naidu, 2020. "Monopsony in Movers: The Elasticity of Labor Supply to Firm Wage Policies," NBER Working Papers 27755, National Bureau of Economic Research, Inc.
    25. Sabrina T. Howell & J. David Brown, 2020. "Do Cash Windfalls Affect Wages? Evidence from R&D Grants to Small Firms," Working Papers 20-6, Center for Economic Studies, U.S. Census Bureau.
    26. Kevin Rinz, 2018. "Labor Market Concentration, Earnings Inequality, and Earnings Mobility," CARRA Working Papers 2018-10, Center for Economic Studies, U.S. Census Bureau.
    27. José Azar & Ioana Marinescu & Marshall Steinbaum, 2019. "Measuring Labor Market Power Two Ways," AEA Papers and Proceedings, American Economic Association, vol. 109, pages 317-321, May.
    28. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-273, May.
    29. Patrick Kline & Neviana Petkova & Heidi Williams & Owen Zidar, 2019. "Who Profits from Patents? Rent-Sharing at Innovative Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(3), pages 1343-1404.
    30. Alan Manning, 2012. "Steady-State Equilibrium in a Model of Short-Term Wage-Posting," CEP Discussion Papers dp1158, Centre for Economic Performance, LSE.
    31. Boris Hirsch & Elke J. Jahn & Claus Schnabel, 2018. "Do Employers Have More Monopsony Power in Slack Labor Markets?," ILR Review, Cornell University, ILR School, vol. 71(3), pages 676-704, May.
    Full references (including those not matched with items on IDEAS)

    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. Marco Pagano & Luca Picariello, 2022. "Corporate Governance, Favoritism and Careers," CSEF Working Papers 643, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 06 Apr 2023.
    3. Akin A. Cilekoglu, 2023. ""Labor Market Monopsony and Firm Behavior: Evidence from Spanish Exporters"," IREA Working Papers 202307, University of Barcelona, Research Institute of Applied Economics, revised Jul 2023.
    4. Kahn, Matthew E. & Tracy, Joseph, 2024. "Monopsony in spatial equilibrium," Regional Science and Urban Economics, Elsevier, vol. 104(C).
    5. Bassier, Ihsaan, 2022. "Firms and inequality when unemployment is high," LSE Research Online Documents on Economics 121970, London School of Economics and Political Science, LSE Library.
    6. 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.
    7. Bassier, Ihsaan, 2022. "Firms and inequality when unemployment is high," LSE Research Online Documents on Economics 117999, London School of Economics and Political Science, LSE Library.
    8. Gibson, Matthew, 2021. "Employer Market Power in Silicon Valley," IZA Discussion Papers 14843, Institute of Labor Economics (IZA).
    9. Ihsaan Bassier, 2022. "Firms and inequality when unemployment is high," CEP Discussion Papers dp1872, Centre for Economic Performance, LSE.
    10. Filippo Passerini, 2022. "Monopsony in labor markets: Empirical evidence from Italian firms," French Stata Users' Group Meetings 2022 24, Stata Users Group.
    11. Bassier, Ihsaan, 2022. "Collective bargaining and spillovers in local labor markets," LSE Research Online Documents on Economics 118057, London School of Economics and Political Science, LSE Library.
    12. Ihsaan Bassier, 2022. "Collective bargaining and spillovers in local labor markets," CEP Discussion Papers dp1895, Centre for Economic Performance, LSE.
    13. Akin A. Cilekoglu, 2023. "“Labor Market Monopsony and Firm Behavior: Evidence from Spanish Exporters”," AQR Working Papers 202304, University of Barcelona, Regional Quantitative Analysis Group, revised Jul 2023.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alan Manning, 2021. "Monopsony in Labor Markets: A Review," ILR Review, Cornell University, ILR School, vol. 74(1), pages 3-26, January.
    2. Monica Langella & Alan Manning, 2021. "Marshall Lecture 2020: The Measure of Monopsony [Monopsony in the UK]," Journal of the European Economic Association, European Economic Association, vol. 19(6), pages 2929-2957.
    3. David Berger & Kyle Herkenhoff & Simon Mongey, 2022. "Labor Market Power," American Economic Review, American Economic Association, vol. 112(4), pages 1147-1193, April.
    4. Azar, José & Marinescu, Ioana & Steinbaum, Marshall & Taska, Bledi, 2020. "Concentration in US labor markets: Evidence from online vacancy data," Labour Economics, Elsevier, vol. 66(C).
    5. 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.
    6. Martins, Pedro S. & Melo, António, 2024. "Making their own weather? Estimating employer labour-market power and its wage effects," Journal of Urban Economics, Elsevier, vol. 139(C).
    7. Kory Kroft & Yao Luo & Magne Mogstad & Bradley Setzler, 2020. "Imperfect Competition and Rents in Labor and Product Markets: The Case of the Construction Industry," NBER Working Papers 27325, National Bureau of Economic Research, Inc.
    8. Gibson, Matthew, 2021. "Employer Market Power in Silicon Valley," IZA Discussion Papers 14843, Institute of Labor Economics (IZA).
    9. Albert Jan Hummel, 2021. "Monopsony Power, Income Taxation and Welfare," CESifo Working Paper Series 9128, CESifo.
    10. Albert Jan Hummel, 2021. "Monopsony power, income taxation and welfare," Tinbergen Institute Discussion Papers 21-051/VI, Tinbergen Institute.
    11. Gregor Jarosch & Jan Sebastian Nimczik & Isaac Sorkin, 2019. "Granular Search, Market Structure, and Wages," NBER Working Papers 26239, National Bureau of Economic Research, Inc.
    12. Chen Yeh & Claudia Macaluso & Brad Hershbein, 2022. "Monopsony in the US Labor Market," American Economic Review, American Economic Association, vol. 112(7), pages 2099-2138, July.
    13. Dami'an Vergara, 2022. "Minimum Wages and Optimal Redistribution," Papers 2202.00839, arXiv.org, revised Dec 2022.
    14. Sabien Dobbelaere & Boris Hirsch & Steffen Mueller & Georg Neuschaeffer, 2024. "Organized Labor, Labor Market Imperfections, and Employer Wage Premia," ILR Review, Cornell University, ILR School, vol. 77(3), pages 396-427, May.
    15. Jose Garcia-Louzao & Alessandro Ruggieri, 2023. "Labor Market Competition and Inequality," Bank of Lithuania Working Paper Series 117, Bank of Lithuania.
    16. Ihsaan Bassier & Arindrajit Dube & Suresh Naidu, 2020. "Monopsony in Movers: The Elasticity of Labor Supply to Firm Wage Policies," NBER Working Papers 27755, National Bureau of Economic Research, Inc.
    17. Bassier, Ihsaan, 2023. "Firms and inequality when unemployment is high," Journal of Development Economics, Elsevier, vol. 161(C).
    18. Bas Scheer & Wiljan van den Berge & Maarten Goos & Alan Manning & Anna Salomons, 2022. "Alternative Work Arrangements and Worker Outcomes: Evidence from Payrolling," CPB Discussion Paper 435, CPB Netherlands Bureau for Economic Policy Analysis.
    19. Sabien Dobbelaere & Catherine Fuss & Mark Vancauteren, 2023. "Does offshoring shape labor market imperfections? A comparative analysis of Belgian and Dutch firms," Tinbergen Institute Discussion Papers 23-006/V, Tinbergen Institute.
    20. Pérez, Jorge & Vial, Felipe & Zárate, Román, 2022. "Urban Transit Infrastructure: Spatial Mismatch and Labor Market Power," Research Department working papers 1992, CAF Development Bank Of Latinamerica.

    More about this item

    Keywords

    monopsony; labour market competition;

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cep:cepdps:dp1780. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: https://cep.lse.ac.uk/_new/publications/discussion-papers/ .

    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.