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Estimating the Firm’s Labor Supply Curve in a “New Monopsony” Framework: Schoolteachers in Missouri

Michael R Ransom and David P. Sims
Journal of Labor Economics
Vol. 28, No. 2, Modern Models of Monopsony in Labor Markets: Tests and Estimates. Papers from a Conference Held in Sundance, Utah, November 2008, Organized by Orley Ashenfelter, Henry Farber, and Michael Ransom. Alan Manning, Editor. Sponsored by Industrial Relations Section, Princeton University (April 2010), pp. 331-355
DOI: 10.1086/649904
Stable URL: http://www.jstor.org/stable/10.1086/649904
Page Count: 25
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Estimating the Firm’s Labor Supply Curve in a “New Monopsony” Framework: Schoolteachers in Missouri
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Abstract

In the context of certain dynamic models, it is possible to infer the elasticity of labor supply to the firm from the elasticity of the quit rate with respect to the wage. Using this property, we estimate the average labor supply elasticity to public school districts in Missouri. We leverage the plausibly exogenous variation in prenegotiated district salary schedules to instrument for actual salary. These estimates imply a labor supply elasticity of about 3.7, suggesting that school districts possess significant market power. The presence of monopsony power in this teacher labor market may be partially explained by its institutional features.

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