This seminar is presented jointly with The Gregory C. Chow Econometric Research Program as an Oskar Morgenstern Memorial Seminar.
This paper considers a static, many-to-one matching model of the labor market. Firms face inelastic labor supply curves and hence charge an endogenous firm-specific markdown below marginal product. We assume that firms operate in an oligopsony labor market and thus allow for strategic interactions in wage setting. We provide a tractable characterization of the equilibrium and demonstrate existence and uniqueness. This characterization of the model equilibrium allows us to derive a rich set of comparative statics and then to gauge the relative contributions of worker skill, preference for amenities and strategic interaction on equilibrium wage inequality. We also illustrate identification of structural parameters using matched employer-employee data on the population of Danish workers.