American Economic Review Vol. 112 No. 1 2022

Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market

Thibaut Lamadon¹; Magne Mogstad²; Bradley Setzler³

¹ Department of Economics, University of Chicago (email: ) · ² Department of Economics, University of Chicago, Statistics Norway, NBER, IFS (email: ) · ³ Department of Economics, Pennsylvania State University (email: )

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.

DOI

10.1257/aer.20190790

Volume

112

Issue

1

Pages

169-212

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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