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Abstract
An important and illegal source of monopsony power are non-compete clauses in workers’ contracts that avoid employers bidding up wages. This paper presents a framework in which the source of monopsony power also originates from workers’ contracts without violating anti-trust regulations: contracts offered by labor market intermediaries such as temporary help agencies. Building on the static monopsony model of Card et al. (2018), we show how intermediation results in wage markdowns and why some workers consent with being paid below their productivity. We then show evidence in support of our model using administrative matched employer-employee data for workers who are being payrolled by their employer.
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Citation
Goos, M., Salomons, A., Scheer, B. and W. van den Berge. 2024. “Monopsony in Intermediation: The Case of Payrolling”.