Monopsony in the US Labor Market

Chen Yeh, Claudia Macaluso and Brad Hershbein

American Economic Review, 2022, vol. 112, issue 7, 2099-2138

Abstract: This paper quantifies employer market power in US manufacturing and how it has changed over time. Using administrative data, we estimate plant-level markdowns—the ratio between a plant's marginal revenue product of labor and its wage. We find most manufacturing plants operate in a monopsonistic environment, with an average markdown of 1.53, implying a worker earning only 65 cents on the marginal dollar generated. To investigate long-term trends for the entire sector, we propose a novel, theoretically grounded measure for the aggregate markdown. We find that it decreased between the late 1970s and the early 2000s, but has been sharply increasing since.

JEL-codes: J24 J31 J38 J42 L13 L60 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (43)

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DOI: 10.1257/aer.20200025

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