Estimating the Firm's Labor Supply Curve in a "New Monopsony" Framework: School Teachers in Missouri

Author
Abstract

In the context of certain dynamic models of monopsony, it is possible to infer the
elasticity of labor supply to the firm from the elasticity of the quit rate with respect to the wage.
Using this property, we estimate the average labor supply elasticity to public school districts in
Missouri. We take advantage of the plausibly exogenous variation in pre-negotiated district
salary schedules to instrument for actual salary. Instrumental variables estimates lead to a labor
supply elasticity estimate of about 3.65, suggesting the presence of significant market power for
school districts, especially over more experienced teachers. This is partially explained by
institutional features of the teacher labor market.

Year of Publication
2008
Number
538
Date Published
12/2008
Publication Language
eng
Citation Key
8158
URL
Working Papers