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Monopsony Makes it Big

Author

Listed:
  • Sydnee Caldwell
  • Arindrajit Dube
  • Suresh Naidu

Abstract

The literature on imperfect competition in labor markets has expanded rapidly in recent years. This article provides a guide to the field, focusing on the firm-specific ("residual") labor supply elasticity as the definition of a firm's labor market power. We present a general framework showing how this elasticity nests the three widely studied sources of monopsony power: search frictions, preference heterogeneity, and employer concentration. We summarize the empirical estimates of the elasticity of labor supply, highlighting sources of possible heterogeneity. We emphasize that it is difficult to infer elasticities from markdowns (and vice versa) due to the diversity of firm wage-setting practices, illustrating this point using the interaction between monopsony and efficiency wages. We discuss how policy issues in antitrust, labor market regulation, immigration, and macroeconomics interact with monopsony and conclude by listing several areas for future research.

Suggested Citation

  • Sydnee Caldwell & Arindrajit Dube & Suresh Naidu, 2026. "Monopsony Makes it Big," NBER Working Papers 35608, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35608
    Note: LS
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    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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