This paper estimates the effects of employer labor market power on wage inequality in the United States. I find that inequality as measured by interdecile range is 23.7% higher in perfectly monopsonistic labor markets than in perfectly competitive markets, even when controlling for commuting zone and occupation fixed effects. I also decompose these results into 50/10 and 90/50 ratios, finding much larger impacts on inequality among low earners. These results suggest that monopsony power has significant and policy-relevant impacts on wage inequality, and particularly harms the lowest earning subsets of the labor force.
Thorpe, Samuel I.
"Labor Market Monopsony and Wage Inequality: Evidence from Online Labor Market Vacancies,"
Undergraduate Economic Review: Vol. 17:
1, Article 11.
Available at: https://digitalcommons.iwu.edu/uer/vol17/iss1/11