IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp16352.html
   My bibliography  Save this paper

Bidding for Talent: A Test of Conduct in a High-Wage Labor Market

Author

Listed:
  • Roussille, Nina

    (MIT)

  • Scuderi, Benjamin

    (UC Berkeley)

Abstract

We develop a procedure for adjudicating between models of firm wage-setting conduct. Using data on workers' choice sets and decisions over real jobs from a U.S. job search platform, we first estimate workers' rankings over firms' non-wage amenities. We document three key findings: 1) On average, workers are willing to accept 12.3% lower salaries for a 1-S.D. improvement in amenities. 2) Between-worker preference dispersion is equally large, indicating that preferences are not well-described by a single ranking. 3) High-paying firms have better amenities. Following the modern IO literature, we use these estimates to formulate a test of conduct based on exclusion restrictions. Oligopsonistic models incorporating strategic interactions between firms and tailoring of wage offers to workers' outside options are rejected in favor of simpler monopsonistic models featuring near-uniform markdowns. Misspecification has meaningful consequences: while our preferred model predicts average markdowns of 19.5%, others predict average markdowns as large as 26.6%.

Suggested Citation

  • Roussille, Nina & Scuderi, Benjamin, 2023. "Bidding for Talent: A Test of Conduct in a High-Wage Labor Market," IZA Discussion Papers 16352, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16352
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp16352.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(3), pages 967-1015.
    2. Dankmar Böhning & Bruce Lindsay, 1988. "Monotonicity of quadratic-approximation algorithms," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 40(4), pages 641-663, December.
    3. Donald, Stephen G. & Paarsch, Harry J., 2002. "Superconsistent estimation and inference in structural econometric models using extreme order statistics," Journal of Econometrics, Elsevier, vol. 109(2), pages 305-340, August.
    4. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    5. Mark Bagnoli & Ted Bergstrom, 2006. "Log-concave probability and its applications," Studies in Economic Theory, in: Charalambos D. Aliprantis & Rosa L. Matzkin & Daniel L. McFadden & James C. Moore & Nicholas C. Yann (ed.), Rationality and Equilibrium, pages 217-241, Springer.
    6. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
    7. Douglas Rivers & Quang Vuong, 2002. "Model selection tests for nonlinear dynamic models," Econometrics Journal, Royal Economic Society, vol. 5(1), pages 1-39, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brian Callaci & Matthew Gibson & Sérgio Pinto & Marshall Steinbaum & Matt Walsh, 2024. "Grads on the Go: The Effect of Franchise No-Poaching Restrictions On Worker Earnings," Upjohn Working Papers 24-405, W.E. Upjohn Institute for Employment Research.
    2. Callaci, Brian & Gibson, Matthew & Pinto, Sergio & Steinbaum, Marshall & Walsh, Matt, 2023. "The Effect of Franchise No-Poaching Restrictions on Worker Earnings," IZA Discussion Papers 16330, Institute of Labor Economics (IZA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Tong, 2009. "Simulation based selection of competing structural econometric models," Journal of Econometrics, Elsevier, vol. 148(2), pages 114-123, February.
    2. Moser, Christian, 2016. "How Could Wage Inequality Within and Across Enterprises be Reduced?," MPRA Paper 95381, University Library of Munich, Germany.
    3. David Card & Jesse Rothstein & Moises Yi, 2021. "Location, Location, Location," Working Papers 21-32, Center for Economic Studies, U.S. Census Bureau.
    4. Philippe Gagnepain & Marc Ivaldi & David Martimort, 2013. "The Cost of Contract Renegotiation: Evidence from the Local Public Sector," American Economic Review, American Economic Association, vol. 103(6), pages 2352-2383, October.
    5. Zhipeng Liao & Xiaoxia Shi, 2020. "A nondegenerate Vuong test and post selection confidence intervals for semi/nonparametric models," Quantitative Economics, Econometric Society, vol. 11(3), pages 983-1017, July.
    6. Céline Bonnet & Pierre Dubois, 2010. "Inference on vertical contracts between manufacturers and retailers allowing for nonlinear pricing and resale price maintenance," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 139-164, March.
    7. Ian M. Schmutte, 2015. "Job Referral Networks and the Determination of Earnings in Local Labor Markets," Journal of Labor Economics, University of Chicago Press, vol. 33(1), pages 1-32.
    8. Xiaoxia Shi, 2015. "A nondegenerate Vuong test," Quantitative Economics, Econometric Society, vol. 6(1), pages 85-121, March.
    9. Susanne M. Schennach & Daniel Wilhelm, 2017. "A Simple Parametric Model Selection Test," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 112(520), pages 1663-1674, October.
    10. Chen, Xiaohong & Hong, Han & Shum, Matthew, 2007. "Nonparametric likelihood ratio model selection tests between parametric likelihood and moment condition models," Journal of Econometrics, Elsevier, vol. 141(1), pages 109-140, November.
    11. Armand, Alex & Carneiro, Pedro & Locatelli, Andrea & Mihreteab, Selam & Keating, Joseph, 2017. "Do public health interventions crowd out private health investments? Malaria control policies in Eritrea," Labour Economics, Elsevier, vol. 45(C), pages 107-115.
    12. Koomen, Miriam & Backes-Gellner, Uschi, 2022. "Occupational tasks and wage inequality in West Germany: A decomposition analysis," Labour Economics, Elsevier, vol. 79(C).
    13. Eun, Sungtae, 2023. "Responses of Consumer And Manufacturer to the Salmonella Outbreak in The U.S. Peanut Butter Market," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 11(4), October.
    14. Raymond Kan & Cesare Robotti & Jay Shanken, 2013. "Pricing Model Performance and the Two‐Pass Cross‐Sectional Regression Methodology," Journal of Finance, American Finance Association, vol. 68(6), pages 2617-2649, December.
    15. Laffineur, Catherine & Gazaniol, Alexandre, 2019. "Foreign direct investment and wage dispersion: Evidence from French employer-employee data," International Economics, Elsevier, vol. 157(C), pages 203-226.
    16. Hnatkovska, Viktoria & Marmer, Vadim & Tang, Yao, 2012. "Comparison of misspecified calibrated models: The minimum distance approach," Journal of Econometrics, Elsevier, vol. 169(1), pages 131-138.
    17. Daniel Baumgarten & Gabriel Felbermayr & Sybille Lehwald, 2020. "Dissecting Between‐Plant and Within‐Plant Wage Dispersion: Evidence from Germany," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 59(1), pages 85-122, January.
    18. Thomas Bauer & Silja Göhlmann & Mathias Sinning, 2007. "Gender differences in smoking behavior," Health Economics, John Wiley & Sons, Ltd., vol. 16(9), pages 895-909, September.
    19. Lee, Seojeong, 2014. "Asymptotic refinements of a misspecification-robust bootstrap for generalized method of moments estimators," Journal of Econometrics, Elsevier, vol. 178(P3), pages 398-413.
    20. Raffaella Giacomini & Barbara Rossi, 2016. "Model Comparisons In Unstable Environments," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(2), pages 369-392, May.

    More about this item

    Keywords

    wage-setting conduct; markdowns; monopsony;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp16352. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.