Working Paper: NBER ID: w27755
Authors: Ihsaan Bassier; Arindrajit Dube; Suresh Naidu
Abstract: We provide new estimates of the separations elasticity, a proximate determinant of the labor supply facing a firm with respect to hourly wage, using matched Oregon employer-employee data. Existing estimates using individual wage variation may be biased by mismeasured wages and use of wage variation unrelated to firm choices. We estimate the impact of the firm component of wage variation on separations using both firm fixed effects estimated from a wage equation as well as a matched IV event study around employment transitions between firms. Separations are a declining function of firm wage policies: we find that the implied firm-level labor supply elasticities generated are around 4, consistent with recent experimental and quasi-experimental evidence, and that they are approximately 3 to 4 times larger that those using individual wages. Further, we find lower separations elasticities for low wage workers, high turnover sectors, and periods of economic downturn but with little heterogeneity by urban status or labor market concentration. We conclude that monopsonistic competition is pervasive, and largely independent of forces driving classical monopsony.
Keywords: monopsony; labor supply elasticity; wage policies; firm-level analysis
JEL Codes: J2; J3; J31; J42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| low-wage workers (J46) | separations elasticities (C29) |
| high-turnover sectors (J60) | separations elasticities (C29) |
| economic downturns (F44) | separations elasticities (C29) |
| urban status (R11) | separations elasticities (C29) |
| labor market concentration (J42) | separations elasticities (C29) |
| firm wage policies (J38) | worker separations (J63) |
| worker separations (J63) | labor supply elasticity (J20) |
| firm wage policies (J38) | labor supply elasticity (J20) |