Monopsony in Movers

Abstract

We estimate the impact of the firm component of hourly wage variation on separations from matched Oregon employer-employee data. We use both firm fixed effects estimated from a wage equation as well as a matched IV event study around employment transitions between firms. Separations decline with firm wage policies: the implied firm-level labor supply elasticities are around 4, consistent with recent quasiexperimental evidence, but 3 to 4 times larger than existing estimates using individual wages. We find that monopsonistic competition is pervasive, even in low-wage, high turnover sectors, but with little heterogeneity by labor market concentration.* Dube acknowledges support from the Washington Center for Equitable Growth. An Online Appendix can be found at http://jhr.uwpress.org/. This paper uses confidential data from Oregon's Unemployment Insurance payroll records, which we obtained as part of a data sharing agreement with the state. To enquire about access, contact the Oregon Employment Department (OED, phone number: 503-947-1394). We gratefully acknowledge the generous help given by the staff at OED.

The impact of centralized bargaining on spillovers and the wage structure in monopsonistic labour markets

“…I avoid this attenuation bias by randomly splitting firms in each industry-location, and instrumenting the average flow for the firm's own sample by the average flow for the complement sample within each industry-location. This approach has been used by Bassier et al (2021) and Goldschmidt and Schmieder (2017).…”

The Profit Paradox: How Thriving Firms Threaten the Future of Work, by JanEeckhout (Princeton University Press, Princeton and Oxford, 2021), ix pp., 327 pp.

“…Firms may also have some market power in the labour market through monopolistic competition (Bhaskar et al, 2002). Indeed, emerging empirical works have documented that labour market concentration in the USA does seem to have significant implications on wage and employment (see, e.g., Azar et al, 2019Azar et al, , 2022Bassier et al, 2022;Dube et al, 2020;Stansbury & Ssummers, 2020). If the market power of firms in the labour markets is significant, should there be policy shifts in collective bargaining and/or minimum wages that counteract some of these monopolies?…”

Monopsony in the Labor Market: New Empirical Results and New Public Policies

“…A concern in studying the effect of wages on turnover rates is that only part of the observed wage is directly attributable to firm discretion. In their paper, "Monopsony in Movers: The Elasticity of Labor Supply to Firm Wage Policies," Bassier, Dube, and Naidu (2022) evaluate different approaches to isolating the firm-specific component of wages, using data from the State of Oregon. A first approach uses the estimated firm effects from an Abowd, Kramarz, and Margolis (1999) two-way fixed effects model.…”

“…For example, in his review of Monopsony in Motion, Kuhn (2004) argued: ".the observation that short-run responses of employment to wages are surely not infinite does not shed much light on the central question at hand: what we really care about is the long run, and whether firm-level labor supply curves are effectively horizontal in the long run.." the Abowd et al specification is that mobility flows are unrelated to the job match component of wages-an assumption that is violated in the Oregon data. Bassier, Dube, and Naidu (2022) implement an alternative "matched job history" procedure that isolates a firm-wide component of wages by comparing quit rates of people who were coworkers prior to their current job. This yields somewhat larger labor supply elasticities (in the range of 4) that are higher for higher-wage workers and also vary procyclically.…”