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

Author

Listed:
  • Ransom, Michael R.

    (Brigham Young University)

  • Oaxaca, Ronald L.

    (University of Arizona)

Abstract

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.

Suggested Citation

  • Ransom, Michael R. & Oaxaca, Ronald L., 2005. "Sex Differences in Pay in a "New Monopsony" Model of the Labor Market," IZA Discussion Papers 1870, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp1870
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    References listed on IDEAS

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    1. Michael Ransom & Ronald L. Oaxaca, 2005. "Intrafirm Mobility and Sex Differences in Pay," ILR Review, Cornell University, ILR School, vol. 58(2), pages 219-237, January.
    2. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, February.
    3. Black, Dan A, 1995. "Discrimination in an Equilibrium Search Model," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 309-333, April.
    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 257-273, May.
    5. 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.
    6. Joan Robinson, 1969. "The Economics of Imperfect Competition," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-15320-6, October.
    7. Bhaskar, V & To, Ted, 1999. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Economic Journal, Royal Economic Society, vol. 109(455), pages 190-203, April.
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    Citations

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    Cited by:

    1. Alison L Booth & Pamela Katic, 2009. "Estimating the Wage Elasticity of Labour Supply to a Firm: Is there Monopsony Down-under?," CEPR Discussion Papers 626, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    2. Hirsch, Boris & Schank, Thorsten & Schnabel, Claus, 2006. "Gender Differences in Labor Supply to Monopsonistic Firms : An Empirical Analysis Using Linked Employer-Employee Data from Germany," Discussion Papers 47, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    3. Manning, Alan, 2011. "Imperfect Competition in the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 11, pages 973-1041, Elsevier.
    4. Alison L. Booth & Pamela Katic, 2011. "Estimating the Wage Elasticity of Labour Supply to a Firm: What Evidence is there for Monopsony?," The Economic Record, The Economic Society of Australia, vol. 87(278), pages 359-369, September.
    5. Jahn, Elke & Pozzoli, Dario, 2011. "Does the Sector Experience Affect the Pay Gap for Temporary Agency Workers?," Working Papers 11-9, University of Aarhus, Aarhus School of Business, Department of Economics.
    6. Depew, Briggs & Sørensen, Todd A., 2013. "The elasticity of labor supply to the firm over the business cycle," Labour Economics, Elsevier, vol. 24(C), pages 196-204.
    7. Ilan Tojerow, 2008. "Industry Wage Differentials Rent Sharing and Gender in Belgium," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(3), pages 55-65.
    8. Arnaud Dupuy & Todd Sorensen, 2014. "On Input Market Frictions and Estimation of Factors' Demand," Southern Economic Journal, John Wiley & Sons, vol. 80(3), pages 772-781, January.

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    Keywords

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    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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