Firm market power and the earnings distribution

Douglas Webber

Labour Economics, 2015, vol. 35, issue C, 123-134

Abstract: Using the Longitudinal Employer Household Dynamics (LEHD) data from the United States Census Bureau, I compute firm-level measures of labor market (monopsony) power. To generate these measures, I extend the empirical strategy of Manning (2003) and estimate the labor supply elasticity facing each private non-farm firm in the U.S. While a link between monopsony power and earnings has traditionally been assumed, I provide the first direct evidence of the positive relationship between a firm's labor supply elasticity and the earnings of its workers. I also contrast the dynamic model strategy with the more traditional use of concentration ratios to measure a firm's labor market power. In addition, I provide several alternative measures of labor market power which account for potential threats to identification such as endogenous mobility. Finally, I construct a counterfactual earnings distribution which allows the effects of firm market power to vary across the earnings distribution.

Keywords: Monopsony; Worker mobility; Earnings inequality (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (65)

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Related works:
Working Paper: Firm Market Power and the Earnings Distribution (2013)
Working Paper: Firm Market Power and the Earnings Distribution (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:35:y:2015:i:c:p:123-134

DOI: 10.1016/j.labeco.2015.05.003

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