Recent empirical work has found evidence that the elasticity of labor supply to individual firms is finite, implying that firms may have wage setting power. However, these studies capture only snapshots of the elasticity. We are the first to study how it changes between economic contractions and economic expansions. To do this, we extend the current identification strategy by relaxing the assumption that a firm replaces all separations with recruits. We take our identification strategy to data by studying two manufacturing firms during the volatile interwar period. Our analysis suggests that the elasticity is lower during recessions than expansions, providing evidence of differential wage setting power over the business cycle. This differential wage setting ability renders an alternative explanation of the pro-cyclicality of real wages and provides a deeper insight into the phenomenon of jobless recoveries.Contact Briggs Depew at bdepew@email.arizona.edu and Todd Sorensen at todd.sorensen@ucr.edu. Feedback received at

Critics of U.S. high-skilled guest worker visa programs argue that 1) program regulations tie workers to their sponsoring firm, creating working conditions akin to indentured servitude and that 2) the programs lack a vehicle for adjusting downward the number of visas available during a recession. We address these two criticisms using unique payroll data from firms that rely upon these programs. Contrary to popular belief, we find that the guest workers in our sample exhibit a significant amount of inter-firm mobility that varies over both the earnings distribution and the business cycle. This suggests that, despite regulatory frictions of the visa programs, competitive pressures are a driving force in this labor market. Furthermore, we find evidence of increased return migration during periods of high unemployment. This is especially true for lower paid workers, suggesting positive selection.

When jobs offered by different employers are not perfect substitutes, employers gain wage-setting power; the extent of this power can be captured by the elasticity of labor supply to the firm. The authors collect 1,320 estimates of this parameter from 53 studies. Findings show a prominent discrepancy between estimates of direct elasticity of labor supply to changes in wage (smaller) and the estimates converted from inverse elasticities (larger), suggesting that labor market institutions may reign in a substantial amount of firm wage-setting power. This gap remains after they control for 22 additional variables and use Bayesian Model Averaging and LASSO to address model uncertainty; however, it is less pronounced for studies employing an identification strategy. Furthermore, the authors find strong evidence that implies the literature on direct estimates is prone to selective reporting: Negative estimates of the elasticity of labor supply to the firm tend to be discarded, leading to upward bias in the mean reported estimate. Additionally, they point out several socioeconomic factors that seem to affect the degree of monopsony power.

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