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Estimating Labor Market Power

Author

Listed:
  • José A. Azar
  • Steven T. Berry
  • Ioana Marinescu

Abstract

Job differentiation gives employers market power, allowing them to pay workers less than their marginal productivity. We estimate a differentiated jobs model using application data from Careerbuilder.com. We find direct evidence of substantial job differentiation. Without the use of instruments for wages, job applications appear very inelastic with respect to wages. Plausible instruments produce elastic firm-level application supply curves. Under some assumptions, the implied market level labor supply elasticity is 0.5, while the firm level labor elasticity is 4.8. This suggests that workers may produce 21% more than their wage level, consistent with significant monopsony power.

Suggested Citation

  • José A. Azar & Steven T. Berry & Ioana Marinescu, 2022. "Estimating Labor Market Power," NBER Working Papers 30365, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30365
    Note: IO
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    Cited by:

    1. Michael Rubens, 2023. "Market Structure, Oligopsony Power, and Productivity," American Economic Review, American Economic Association, vol. 113(9), pages 2382-2410, September.
    2. Suguru Otani, 2024. "Nonparametric Estimation of Matching Efficiency and Elasticity on a Private On-the-Job Search Platform: Evidence from Japan, 2014-2024," Papers 2410.17011, arXiv.org, revised Dec 2024.
    3. Jose Garcia-Louzao & Alessandro Ruggieri, 2023. "Labor Market Competition and Inequality," CESifo Working Paper Series 10829, CESifo.
    4. Abramova, Inna, 2024. "Labor supply and M&A in the audit market," Journal of Accounting and Economics, Elsevier, vol. 78(1).
    5. Amodio, Francesco & Brancati, Emanuele & De Roux, Nicolas & Di Maio, Michele, 2024. "The Labor Market Power of Exporting Firms: Evidence from Latin America," IDB Publications (Working Papers) 13451, Inter-American Development Bank.
    6. Escudero, Veronica & Liepmann, Hannah & Vergara, Damian, 2024. "Directed Search, Wages, and Non-wage Amenities: Evidence from an Online Job Board," IZA Discussion Papers 17211, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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