Imperfect Competition, Compensating Differentials and Rent Sharing in the U.S. Labor Market

Thibaut Lamadon, Magne Mogstad and Bradley Setzler

No 25954, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We quantify the importance of imperfect competition in the U.S. labor market by estimating the size of rents earned by American firms and workers from ongoing employment relationships. To this end, we construct a matched employer-employee panel data set by combining the universe of U.S. business and worker tax records for the period 2001-2015. Using this panel data, we identify and estimate an equilibrium model of the labor market with two-sided heterogeneity where workers view firms as imperfect substitutes because of heterogeneous preferences over non-wage job characteristics. The model allows us to draw inference about imperfect competition, compensating differentials and rent sharing. We also use the model to quantify the relevance of non-wage job characteristics and imperfect competition for inequality and tax policy, to assess the economic determinants of worker sorting, and to offer a unifying explanation of key empirical features of the U.S. labor market.

JEL-codes: J20 J30 J42 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-com and nep-lma
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Citations: View citations in EconPapers (68)

Published as Thibaut Lamadon & Magne Mogstad & Bradley Setzler, 2022. "Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market," American Economic Review, American Economic Association, vol. 112(1), pages 169-212, January.

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Journal Article: Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market (2022)
Working Paper: Imperfect Competition, Compensating Differentials and Rent Sharing in the U.S. Labor Market (2019)
Working Paper: Imperfect competition, compensating differentials and rent sharing in the U.S. labor market (2019)
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