American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market
American Economic Review
vol. 112,
no. 1, January 2022
(pp. 169–212)
Abstract
We quantify the importance of imperfect competition in the US labor market by estimating the size of labor market rents earned by American firms and workers. We construct a matched employer-employee panel dataset by combining the universe of US business and worker tax records for the period 2001–2015. Using this panel data, we identify and estimate an equilibrium model of the labor market with two-sided heterogeneity where workers view firms as imperfect substitutes because of heterogeneous preferences over nonwage job characteristics. The model allows us to draw inference about imperfect competition, worker sorting, compensating differentials, and rent sharing.Citation
Lamadon, Thibaut, Magne Mogstad, and Bradley Setzler. 2022. "Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market." American Economic Review, 112 (1): 169–212. DOI: 10.1257/aer.20190790Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- J22 Time Allocation and Labor Supply
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- J42 Monopsony; Segmented Labor Markets