GEP Seminar: Nikhil Datta (University of Warwick)

This is an in-person event.

Title:  Local monopsony power 

Abstract: This paper studies the extent of monopsony power across labour markets and explores its determinants. I emphasise the role of the spatial distribution of activity and workers’ distaste for commuting in generating imperfect substitutability between jobs, and heterogeneity in monopsony power. To formalise the role of commutes in generating monopsony power I develop a job search model where utility depends on wages, commutes and an idiosyncratic component. The model endogenously defines probabilistic spatial labour markets which are point specific and overlapping, and generates labour supply to the firm elasticities which vary across space. Distaste for commuting is shown to increase monopsony power, but does so heterogeneously, increasing monopsony power in rural areas more than in denser urban areas. Using detailed HR data for a firm with hundreds of establishments across the UK, coupled with two sources of job-establishment level exogenous wage variation I demonstrate the spatial heterogeneity in market-power predicted by the model is evidenced in causal estimates using the HR data, as well as descriptive estimates using a nationally representative dataset. Structurally estimating the model using spatial variation in monopsony power I find that commutes are responsible for approximately 1/3 of the wage markdown. 

NB:  Change of date to that previously advertised.