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Sex Differences in Pay in a "New Monopsony" Model of the Labor Market

  • Ransom, Michael R.


    (Brigham Young University)

  • Oaxaca, Ronald L.


    (University of Arizona)

We use a simple framework, adopted from general equilibrium search models, to estimate the extent to which monopsony power (or labor market frictions) can account for gender differences in pay, using data from a chain of regional grocery stores. In this framework, the elasticity of labor supply to the firm can be inferred from estimates of the elasticity of the separation rate with respect to the wage. We identify elasticities of separation from differences in wages and separation rates across job titles and across different years. We estimate elasticities of labor supply to the firm of about 3.5 for men and about 2.7 for women, suggesting significant wage-setting power for the firm. The differences in estimated elasticities of labor supply predict wage differences that are close to the observed male/female wage differences at the firm.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1870.

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Length: 28 pages
Date of creation: Dec 2005
Date of revision:
Publication status: published in: Journal of Labor Economics, 2010, 28(2), 267-289
Handle: RePEc:iza:izadps:dp1870
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  1. Michael Ransom & Ronald L. Oaxaca, 2005. "Intrafirm mobility and sex differences in pay," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(2), pages 219-237, January.
  2. V. Bhaskar & Ted To, 1996. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Labor and Demography 9603001, EconWPA, revised 21 May 1996.
  3. William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March.
  4. 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 257-73, May.
  5. Black, Dan A, 1995. "Discrimination in an Equilibrium Search Model," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 309-33, April.
  6. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
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