Imperfect Competition, Compensating Differentials and Rent Sharing in the U.S. Labor Market
- American Economic Review (Forthcoming)
We quantify the importance of imperfect competition in the U.S.
labor market by estimating the size of labor market rents earned by
American firms and workers. We construct a matched employer-employee panel data set by combining the universe of U.S. 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 forms
as imperfect substitutes because of heterogeneous preferences over
non-wage job characteristics. The model allows us to draw inference about imperfect competition, worker sorting, compensating
differentials, and rent sharing.
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