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New Market Power Models and Sex Differences in Pay

  • Michael R. Ransom

    (Brigham Young University and IZA)

  • Ronald L. Oaxaca

    (University of Arizona and IZA)

In the context of certain general equilibrium search models, 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. We use this framework to estimate the elasticity of labor supply for men and women workers at a chain of grocery stores operating in the southwestern United States, identifying separation elasticities from differences in wages and separation rates across different job titles within the firm. We estimate elasticities of labor supply to the firm of about 2.7 for men and about 1.5 for women, suggesting significant wage-setting power for the firm. Since women have lower elasticities of labor supply to the firm, a Robinson-style monopsony model might explain lower relative pay of women in the grocery industry. The wage gaps we observe among workers in US retail grocery stores are close to what the monopsony model predicts for the elasticities we have estimated.

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Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 1110.

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Date of creation: Dec 2008
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Handle: RePEc:pri:indrel:dsp01nk322d34x
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  1. Mortensen, D. T. & Vishwanath, T., 1995. "Personal contacts and earnings: It is who you know!," Labour Economics, Elsevier, vol. 2(1), pages 103-104, March.
  2. Bowlus, A.J., 1995. "A Search Interpretation of Male-Female Wage Differentials," UWO Department of Economics Working Papers 9504, University of Western Ontario, Department of Economics.
  3. 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.
  4. Meitzen, Mark E, 1986. "Differences in Male and Female Job-quitting Behavior," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 151-67, April.
  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. Francine D. Blau & Lawrence M. Kahn, 1981. "Race and Sex Differences in Quits by Young Workers," ILR Review, Cornell University, ILR School, vol. 34(4), pages 563-577, July.
  7. 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.
  8. 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.
  9. Viscusi, W Kip, 1980. "Sex Differences in Worker Quitting," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 388-98, August.
  10. 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..
  11. Erling Barth & Harald Dale-Olsen, 1999. "Monopsonistic Discrimination and the Gender-Wage Gap," NBER Working Papers 7197, National Bureau of Economic Research, Inc.
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