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What happens if an employer cuts wages by one cent? Much of labor economics is built on the assumption that all the workers will quit immediately. Here, Alan Manning mounts a systematic challenge to the standard model of perfect competition.Monopsony in Motionstands apart by analyzing labor markets from the real-world perspective that employers have significant market (or monopsony) power over their workers. Arguing that this power derives from frictions in the labor market that make it time-consuming and costly for workers to change jobs, Manning re-examines much of labor economics based on this alternative and equally plausible assumption. The book addresses the theoretical implications of monopsony and presents a wealth of empirical evidence. Our understanding of the distribution of wages, unemployment, and human capital can all be improved by recognizing that employers have some monopsony power over their workers. Also considered are policy issues including the minimum wage, equal pay legislation, and caps on working hours. In a monopsonistic labor market, concludes Manning, the \"free\" market can no longer be sustained as an ideal and labor economists need to be more open-minded in their evaluation of labor market policies.Monopsony in Motionwill represent for some a new fundamental text in the advanced study of labor economics, and for others, an invaluable alternative perspective that henceforth must be taken into account in any serious consideration of the subject.

Consistent with two models of imperfect competition in the labor market—the efficient bargaining model and the monopsony model—we provide two extensions of a microeconomic version of Hall's framework for estimating price-cost margins. We show that both product and labor market imperfections generate a wedge between factor elasticities in the production function and their corresponding shares in revenue, which can be characterized by a 'joint market imperfections parameter'. Using an unbalanced panel of 10,646 French firms in 38 manufacturing industries over the period 1978—2001, we can classify these industries into six different regimes depending on the type of competition in the product and the labor market. By far the most predominant regime is one of imperfect competition in the product market and efficient bargaining in the labor market (IC-EB), followed by a regime of imperfect competition in the product market and perfect competition or right-to-manage bargaining in the labor market (IC-PR), and by a regime of perfect competition in the product market and monopsony in the labor market (PC-MO). For each of these three predominant regimes, we assess within-regime firm differences in the estimated average price-cost mark-up and rent sharing or labor supply elasticity parameters, following the Swamy methodology to determine the degree of true firm dispersion. To assess the plausibility of our findings in the case of the dominant regime (IC-EB), we also relate our industry and firm-level estimates of price-cost mark-up and extent of rent sharing to industry characteristics and firm-specific variables respectively.

We propose to analyze the relationship between inequality and economic development by means of an Agent Based-Stock Flow Consistent model where workers have been differentiated into four classes competing on segmented labor markets, and where firms’ demand for each type of worker is affected by their hierarchical organization. In order to account for the impact of income and wealth distribution on consumption patterns, worker classes have diversified average propensities to consume and save. Finally, firms in the capital sector invest in R&D, thus possibly coming to produce more productive vintages of machineries, which affect the evolution of labor productivity in the consumption sector. The model is calibrated using realistic values for the income and wealth distribution across different income groups and their average propensities to consume. Results of the simulation experiments suggest that more progressive tax schemes and measures that sustain the dynamics of wages of low and middle level workers concur to foster economic development and to reduce inequality. However, the latter seem to be more effective under both respects. Therefore, the model results are broadly in line with the literature suggesting the prevalence of wage-led growth regimes in closed economic systems. In the conclusions we discuss current limitations and future development of the present research.

We analyse a model of equilibrium directed search in a large labour market. Each worker, observing the wages posted at all vacancies, makes a fixed, finite number of applications, a. We allow for the possibility of ex post competition should more than one vacancy want to hire the same worker. For each a, there is a unique symmetric equilibrium in which all vacancies post the same wage. When a = 1, the common posted wage lies between the competitive and monopsony levels, and equilibrium is efficient. When a > 1, all vacancies post the monopsony wage. Some workers fail to find a job, some find a job at the monopsony wage, and some—those for whom there is competition—get the competitive wage. Equilibrium is inefficient when a > 1; in particular, there is excessive vacancy creation.

This paper considers equilibrium quit turnover in a frictional labor market with costly hiring by firms, where large firms employ many workers and face both aggregate and firm specific productivity shocks. There is exogenous firm turnover as new (small) startups enter the market over time, while some existing firms fail and exit. Individual firm growth rates are disperse and evolve stochastically. The paper highlights how dynamic monopsony, where firms trade off lower wages against higher (endogenous) employee quit rates, yields excessive job-to-job quits. Such quits directly crowd out the reemployment prospects of the unemployed. With finite firm productivity states, stochastic equilibrium is fully tractable and can be computed using standard numerical techniques.

Using store-level and aggregated Consumer Price Index data, we show that restaurant prices rise in response to minimum wage increases under several sources of identifying variation. We introduce a general model of employment determination that implies minimum wage hikes cause prices to rise in competitive labor markets but potentially fall in monopsonistic environments. Furthermore, the model implies employment and prices are always negatively related. Therefore, our empirical results provide evidence against the importance of monopsony power for understanding small observed employment responses to minimum wage changes. Our estimated price responses challenge other explanations of the small employment response, too.

This paper focuses on gender differences in job mobility and earnings for workers in Brazil. Monopsony theory suggests a link between the wage elasticity of labor supply and wage penalties. Should one group of workers be less elastic in their supply choices, that group is predicted to earn less than others. To measure wage elasticity, I estimate a hazard model on voluntary job separations using the RAIS, a linked employer-employee dataset that captures formal-sector workers' job durations over time. Four models are specified and point to significant gender differences. Across the models, male elasticity ranges from 1.638 to 2.175 while female elasticity ranges from 1.22 to 1.502. The female wage penalty predicted by these elasticity differences ranges from 11.4 to 20.5%, compared to an actual gender wage difference of 16.4%. Results of higher male elasticity are robust to the use of a more parsimonious specification, a discrete-time approach, the use of job spell data for a single year, and disaggregation by region. I extend the model through decomposition methods to help clarify the association between earnings, job separations, and elasticity.

Using longitudinal data from the Bank of Italy that cover the period from 2004 to 2014, this paper investigates the wage- and career implications of temporary jobs across the entire wage profile via unconditional quantile regression models and dynamic panel probit models. Building on Autor’s contributions, we consider temporary jobs to be a Labour Market Intermediary that deals with job-matching problems, such as information asymmetries, search cost reductions, worker-side adverse selection, and pay-productivity gaps. Assuming that wage is a proxy for workers’ productivity, we examine the chances that temporary workers who are located in different quantiles of wage distribution have of making the transition towards a stable employment position in the primary labour market. Results clearly indicate that temporarily employed individuals suffer significant wage- and career penalties. Not only are these individuals overly concentrated in the lowest decile of wage distribution, but the career penalty associated with temporary jobs also remains stable independently of the wage/productivity quantile to which the workers belong. If firms use FTC or TWA at all, they do so to remove less productive workers, whose work contract is not renewed once expired. In light of this evidence, it is clear that the hypothesis—proposed in the economic literature—that temporary employment contracts might serve as a screening tool to identify the most productive workers who would then be offered a stable position in the primary labour market does not hold in the highly dualised labour market of Southern Europe.

The unique equilibrium solution to a game in which a continuum of individual employers choose permanent wage offers and a continuum of workers search by sequentially sampling from the set of offers is characterized. Wage dispersion is a robust outcome provided that workers search while employed as well as when unemployed. The unique nondegenerate equilibrium distribution of wage offers is constructed for three cases: (i) identical workers and employers, (ii) identical employers and an atomless distribution of worker supply prices, and (iii) identical workers and an atomless distribution of job productivities.