Monopsony in Movers

Abstract

We estimate the impact of the firm component of hourly wage variation on separations from matched Oregon employer–employee data. We use both firm fixed effects estimated from a wage equation as well as a matched instrumental variable (IV) event study around employment transitions between firms. Separations decline with firm wage policies: the implied firm-level labor supply elasticities are around 4, consistent with recent quasi-experimental evidence, but three to four times larger than existing estimates using individual wages. We find that monopsonistic competition is pervasive, even in low-wage, high-turnover sectors, but with little heterogeneity by labor market concentration