Monopsony - Empirical Problems

Empirical Problems

The simplified dynamics sketched above suggests that the frequent observation of short-run relative inelasticity of labour supply to individual firms may not be very relevant to the diagnosis of significant monopsony power. Efforts to measure the size of the exploitation rate in specific labour markets have hence taken various forms:

• direct measurement of wage and MRP
• estimates of the long-run supply elasticity of labour to firms
• cross-sectional comparisons of wages and employer concentration
• correlations between wages and workers' mobility
• structural estimation of equilibrium search models
• employment effects of minimum wages

The results of these empirical works are rarely unambiguous. However, even in cases such as coal miners or nurses, most US studies suggest rates of exploitation probably lower than marginal tax rates on workers' incomes, or union relative wage effects. The better documented instances of significant exploitation are found in the probably rare cases of explicit collusion, such as US baseball before the reserve clause.