Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market
Thibaut Lamadon, Magne Mogstad, Bradley Setzler
American Economic Review · 2022 · Volume 112 · Issue 1
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.
Keywords
Production, Cost, Capital, Total Factor, and Multifactor Productivity, Capacity, Personal Income and Other Nonbusiness Taxes and Subsidies, includes inheritance and gift taxes, Business Taxes and Subsidies including sales and value-added (VAT), Time Allocation and Labor Supply, Human Capital, Skills, Occupational Choice, Labor Productivity, Wage Level and Structure, Wage Differentials, Monopsony, Segmented Labor Markets
Enable JavaScript for citation tools and additional paper interactions.