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Estimating the Firm's Labor Supply Curve in a "New Monopsony" Framework: School Teachers in Missouri

  • Michael R. Ransom

    (Brigham Young University)

  • David P. Sims

    (Brigham Young University)

In the context of certain dynamic models of monopsony, it is possible to infer the elasticity of labor supply to the firm from the elasticity of the quit rate with respect to the wage. Using this property, we estimate the average labor supply elasticity to public school districts in Missouri. We take advantage of the plausibly exogenous variation in pre-negotiated district salary schedules to instrument for actual salary. Instrumental variables estimates lead to a labor supply elasticity estimate of about 3.65, suggesting the presence of significant market power for school districts, especially over more experienced teachers. This is partially explained by institutional features of the teacher labor market.

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File URL: http://arks.princeton.edu/ark:/88435/dsp011831cj94z
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Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 1108.

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Date of creation: Dec 2008
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Handle: RePEc:pri:indrel:dsp011831cj94z
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  1. Pencavel, John H, 1972. "Wages, Specific Training, and Labor Turnover in US Manufacturing Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 53-64, February.
  2. Donald Boyd & Hamilton Lankford & Susanna Loeb & James Wyckoff, 2005. "The draw of home: How teachers' preferences for proximity disadvantage urban schools," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 24(1), pages 113-132.
  3. Christian Bontemps & Jean-Marc Robin & GĂ©rard J. Van den Berg, 1999. "An Empirical Equilibrium Job Search Model With Search on the Job and Heterogeneous Workers and Firms," Post-Print hal-00357757, HAL.
  4. 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.
  5. Peter Kuhn, 2004. "Is monopsony the right way to model labor markets? a review of Alan Manning's monopsony in motion," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 11(3), pages 369-378.
  6. 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.
  7. Parsons, Donald O, 1972. "Specific Human Capital: An Application to Quit Rates and Layoff Rates," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1120-43, Nov.-Dec..
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