Monopsony in Movers: The Elasticity of Labor Supply to Firm Wage Policies

Ihsaan Bassier, Arindrajit Dube and Suresh Naidu

No 27755, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We provide new estimates of the separations elasticity, a proximate determinant of the labor supply facing a firm with respect to hourly wage, using matched Oregon employer-employee data. Existing estimates using individual wage variation may be biased by mismeasured wages and use of wage variation unrelated to firm choices. We estimate the impact of the firm component of wage variation on separations using both firm fixed effects estimated from a wage equation as well as a matched IV event study around employment transitions between firms. Separations are a declining function of firm wage policies: we find that the implied firm-level labor supply elasticities generated are around 4, consistent with recent experimental and quasi-experimental evidence, and that they are approximately 3 to 4 times larger that those using individual wages. Further, we find lower separations elasticities for low wage workers, high turnover sectors, and periods of economic downturn but with little heterogeneity by urban status or labor market concentration. We conclude that monopsonistic competition is pervasive, and largely independent of forces driving classical monopsony.

JEL-codes: J2 J3 J31 J42 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-lma
Note: LS
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Citations: View citations in EconPapers (14)

Published as Ihsaan Bassier & Arindrajit Dube & Suresh Naidu, 2022. "Monopsony in Movers," Journal of Human Resources, vol 57(S), pages S50-s86.

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