Employer market power: models and methods

It is now widely recognized that employers hold some wage-setting power over workers, and several recent reviews cover the resulting surge of research on monopsony. We take a high-level view, introducing the idea of the employment probability function (EPF) which describes how workers are assigned to firms as a way to link disparate parts of the current literature. The paper discusses different approaches to specifying the EPF and how they lead to different approaches for estimating employer power. The paper has some new results - the adding-up condition for pass-through parameters, how failures of log-concavity can lead to segmentation and how models of idiosyncratic preferences and frictions can be combined in a single framework. It also points out gaps in the existing literature e.g. on the sign of the super-elasticity, the role of employer choice, and truly dynamic models.