This paper summarizes the results of nearly a dozen new papers presented at the Sundance Conference on Monopsony in Labor Markets held in October 2018. These papers, to be published as a special issue of the Journal of Human Resources, study various aspects of monopsony and failures of competition in labor markets. It also reports on the new developments in public policies associated with widespread concerns about labor market competition and efforts to ameliorate competitive failures. The conference papers range from studies of the labor supply elasticity individual firms face to studies of local labor market concentration to studies of explicit covenants suppressing labor market competition. New policies range from private and public antitrust litigation to concerns about the effect of mergers and inter-firm agreements on labor market competition. We provide a detailed discussion of the mechanics of the Silicon Valley High Tech Worker conspiracy to suppress competition based on Court documents in the case. Non-compete agreements, which are not enforceable in three states already, have also come under scrutiny.
This paper investigates women's and men's labor supply to the firm
within a structural approach based on a dynamic model of new
monopsony. Using methods of survival analysis and a large linked
employer-employee dataset for Germany, we find that labor supply
elasticities are small (1.9-3.7) and that women's labor supply to the firm
is less elas~ic than men's (which is the reverse of gender differences in
labor supply usually found at the level of the market). Our results imply
that about one third of the gender pay gap might be wage discrimination
by profit-maximizing monopsonistic employers.
This paper shows, using data from both the US and the UK, that average plant size is
larger in denser markets. However, many popular theories of agglomeration – spillovers,
cost advantages and improved match quality – predict that establishments should
be smaller in cities. The paper proposes a theory based on monopsony in labour markets
that can explain the stylized fact – that firms in all labour markets have some market
power but that they have less market power in cities. It also presents evidence that the
labour supply curve to individual firms is more elastic in larger markets.
Because it is differentiated from other employers, the U.S. military
enjoys some monopsony power. After reviewing existing estimates of the
elasticity of labor supplied to the military, we obtain new estimates for the Army
and Navy covering the period from 1998-2007. We employ a control function
approach to account for the potential endogeneity of enlistment incentives. Our
elasticity estimates of 2.4 for the Army and .4 for the Navy suggest that the
services have substantial wage-setting ability. However, the Army faces higher
supply elasticity since the invasion of Iraq and higher elasticity in states with
weak support for obligatory military service.
This paper uses data from the 1990s to examine changes in the wages, employment, and
e¤ort of nurses in California hospitals following takeovers by large chains. The market for
nurses has been described as a classic monopsony, so that one might expect increases in rm
market power to be associated with declines in wages. However, a basic contracting model
predicts e¤ects on e¤ort rather than on wages, which is what we see in the data nurses
see few declines in wages following takeovers, but see increases in the number of patients per
nurse, our measure of e¤ort. We show that our results are also consistent with an extended
version of the monopsony model that considers e¤ort, and allows for revenue shifts following
a takeover. Finally, we nd that these changes are similar in the largest for-pro t and
non-pro t chains, suggesting that market forces are more important than institutional form.
I estimate the relative magnitudes of worker switching costs and whether the employer switching of experienced
engineers responds to outside wage offers. Institutional features imply that voluntary turnover
dominates switching in the market for Swedish engineers from 1970–1990. I use data on the allocation of engineers
across a large fraction of Swedish private sector firms to estimate the relative importance of employer
wage policies and switching costs in a dynamic programming, discrete choice model of voluntary employer
choice. The differentiated firms are modeled in employer characteristic space and each firm has its own agewage
profile. I find that a majority of engineers have moderately high switching costs and that a minority of
experienced workers are responsive to outside wage offers. Younger workers are more sensitive to outside
wage offers than older workers.
A variety of recent theoretical and empirical advances have renewed interest in
monopsonistic models of the labor market. However, there is little direct empirical support
for these models, even in labor markets that are textbook examples of monopsony. We use
an exogenous change in wages at Veterans Affairs hospitals as a natural experiment to
investigate the extent of monopsony in the nurse labor market. In contrast to much of the prior
literature, we estimate that labor supply to individual hospitals is quite inelastic, with short-run
elasticity around 0.1. We also find that non-VA hospitals responded to the VA wage change
by changing their own wages.
Low-wage labor markets are traditionally viewed as competitive,
and the possibility of strategic behavior by employers is dismissed.
However, such behavior is not impossible. This paper investigates the
possibility of tacit collusion by low-wage employers while setting wages.
A game-theoretic explanation along the lines of the Folk theorem is offered,
suggesting that a non-binding minimum wage may serve as a
focal point for tacit collusion, proposing a symmetric solution to an
infinitely played game of wage-setting. Several empirical techniques
were employed in testing the hypothesis, including hurdle models of
collusion. CPS monthly data is used for the years 1990-2005, covering
the last four federal minimum wage increases. The likelihood of collusion
at minimum wage is evaluated, as well as its dynamics during
this period. The results generally support the collusion hypothesis and
suggest that employers respond strategically to changes in minimum
wage legislation while using the statutory minimum wage as a coordination
tool in tacit collusion.
In this paper we study the role of covenants in franchise contracts that restrict the recruitment and hiring of employees from other units within the same franchise chain in suppressing and hiring of employees from other units within the same franchise chain in suppressing find that “no-poaching of workers agreements” are included in a surprising 58 percent of major franchisors’ contracts, including McDonald’s, Burger King, Jiffy Lube and H&R Block. Theoretical models of oligopsony and dynamic monopsony, as well as incentives for investment in job training, are discussed in the context of these no-poaching agreements. Although the occurrence of no-poaching agreements is difficult to predict from franchise or industry characteristics, no-poaching agreements are more common for franchises in low-wage and high-turnover industries.