Monopsony in the Labor Market

Monopolistic exploitation arising from supply frictions, whether modeled as differentiation or search, is probably widespread but small on average. Dynamic studies of workers and firms suggest that short-run inverse elasticities are probably no higher than previous estimates of the elasticity of wag...

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Bibliographic Details
Published in:Journal of economic literature 1997-03, Vol.35 (1), p.86-112
Main Authors: Boal, William M., Ransom, Michael R
Format: Article
Language:English
Subjects:
Economic models
Employment
Exploitation
Labor market
Labor markets
Labor supply
Labor supply elasticity
Marginal revenue products
Minimum wage
Monopsony
Price elasticity of supply
Studies
Wages
Wages & salaries
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Summary:Monopolistic exploitation arising from supply frictions, whether modeled as differentiation or search, is probably widespread but small on average. Dynamic studies of workers and firms suggest that short-run inverse elasticities are probably no higher than previous estimates of the elasticity of wages with respect to firm size, about 0.03 or 0.04. At sensible discount rate, the rate of exploitation is likely to be only a little higher then these latter values. Even studies of textbook examples of monopsony such as nursing and coal mining suggest rates of exploitation no higher than about 0.15 and sometimes as low as zero. Thus rates of exploitation arising from supply frictions are probably lower than, say, union relative wage effects or marginal income tax rates faced by US workers. Monopsonistic exploitation arising from explicit collusion is probably rare but occasionally large. Well-documented cases include US baseball before the reserve clause and perhaps other professional sports. Even in these cases, however, the best estimates of the rate of exploitation reported to date are probably not very accurate.
ISSN:0022-0515
2328-8175