Testing for Employer Monopsony in Turn-of-the-Century Coal Mining

William M. Boal

RAND Journal of Economics, 1995, vol. 26, issue 3, 519-536

Abstract: Isolated company towns are often cited as likely examples of labor monopsony. This article tests for monopsony power by estimating inverse labor supply elasticities using a county-level panel dataset on nonunion West Virginia coal mining from 1897 to 1932. The model specification incorporates dynamics in such a way that an estimate of the gap between marginal revenue product and the wage can easily be computed as a weighted average of short- and long-run inverse elasticities. Modest estimated short-run inverse elasticities and very small long-run inverse elasticities imply that coal operators enjoyed little, if any, monopsony power over their workers.

Date: 1995
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