Estimating labor market monopsony power from a forward-looking perspective

Qingyang Han

Economics Letters, 2024, vol. 244, issue C

Abstract: This paper proposes a new approach to estimate the monopsony power of the labor market based on a forward-looking model of firm wage posting and worker job separation. In contrast to the literature, workers make job switching decisions based on firm-specific wage growth trajectories associated with different employers. The model is estimated using a matched employer employee panel data from Germany. The separation elasticity estimated from this model is greater than that from the conventional approach, suggesting that ignoring worker responses to heterogeneous wage growth rates lead to a potential overestimation of the actual monopsony power.

Keywords: Monopsony power; Firm-specific labor supply elasticity; Wage heterogeneity (search for similar items in EconPapers)
JEL-codes: C51 J23 J24 J31 J42 J62 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524005068

DOI: 10.1016/j.econlet.2024.112022

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