Imperfect competition, compensating differentials and rent sharing in the U.S. labor market

Thibaut Lamadon, Magne Mogstad and Bradley Setzler

Discussion Papers from Statistics Norway, Research Department

Abstract: The primary goal of our paper is to quantify the importance of imperfect competition in the U.S. labor market by estimating the size of rents earned by American firms and workers from ongoing employment relationships. To this end, we construct a matched employeremployee panel data set by combining the universe of U.S. business and worker tax records for the period 2001-2015. Using this panel data, we describe several important features of the U.S. labor market, including the size of firm-specific wage premiums, the sorting of workers to firms, the production complementarities between high ability workers and productive firms, and the pass-through of firm and market shocks to workers’ wages. Guided by these empirical results, we develop, identify and estimate an equilibrium model of the labor market with two-sided heterogeneity where workers view firms as imperfect substitutes because of heterogeneous preferences over non-wage job characteristics. The model allows us to draw inference about imperfect competition, compensating differentials and rent sharing. We also use the model to quantify the relevance of non-wage job characteristics and imperfect competition for inequality and tax policy, to assess the economic determinants of worker sorting, and to offer a unifying explanation of key empirical features of the U.S. labor market.

Keywords: Compensating differentials; firm effects; inequality; imperfect competition; monopsony; rent sharing; wage setting; worker sorting (search for similar items in EconPapers)
JEL-codes: J20 J30 J42 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2019-10
New Economics Papers: this item is included in nep-com and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (73)

Downloads: (external link)
https://www.ssb.no/en/forskning/discussion-papers/_attachment/399632 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market (2022)
Working Paper: Imperfect Competition, Compensating Differentials and Rent Sharing in the U.S. Labor Market (2019)
Working Paper: Imperfect Competition, Compensating Differentials and Rent Sharing in the U.S. Labor Market (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ssb:dispap:918

Ordering information: This working paper can be ordered from
https://www.ssb.no/e ... the-u.s.labor-market

Access Statistics for this paper

More papers in Discussion Papers from Statistics Norway, Research Department P.O.Box 8131 Dep, N-0033 Oslo, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by L Maasø ().