American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Monopsony in the US Labor Market
American Economic Review
vol. 112,
no. 7, July 2022
(pp. 2099–2138)
Abstract
This paper quantifies employer market power in US manufacturing and how it has changed over time. Using administrative data, we estimate plant-level markdowns—the ratio between a plant's marginal revenue product of labor and its wage. We find most manufacturing plants operate in a monopsonistic environment, with an average markdown of 1.53, implying a worker earning only 65 cents on the marginal dollar generated. To investigate long-term trends for the entire sector, we propose a novel, theoretically grounded measure for the aggregate markdown. We find that it decreased between the late 1970s and the early 2000s, but has been sharply increasing since.Citation
Yeh, Chen, Claudia Macaluso, and Brad Hershbein. 2022. "Monopsony in the US Labor Market." American Economic Review, 112 (7): 2099–2138. DOI: 10.1257/aer.20200025Additional Materials
JEL Classification
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- J38 Wages, Compensation, and Labor Costs: Public Policy
- J42 Monopsony; Segmented Labor Markets
- L13 Oligopoly and Other Imperfect Markets
- L60 Industry Studies: Manufacturing: General