Introduction
This module discusses recent insights into the monopsonistic nature of labor markets.
1. Firm wage premia
If firms have no wage-setting power, firm wage premia would not exist for equally productive workers. Here we discuss that firm wage premia do exist and are important for explaining wage inequality.
Card, Heining and Kline (2013)
The paper discussed is Card, Heining and Kline (2013), “Workplace Heterogeneity and the Rise of West German Wage Inequality”, Quarterly Journal of Economics. The discussion explains the AKM estimator to identify worker and firm types in matched employer-employee data and shows the importance of firm wage premia and sorting in explaining wage inequality. The discussion also refers to other papers for further reading.
Further readings
2. New classical monopsony
Card, Cardoso, Heining and Kline (2018)
The paper discussed is Card, Cardoso, Heining and Kline (2018), “Firms and Labor Market Inequality: Evidence and Some Theory”, Journal of Labor Economics.