An anatomy of monopsony : Search frictions, amenities and bargaining in concentrated markets

We contribute a theory in which three channels interact to determine the degree of monopsony power and therefore the markdown of a worker’s spot wage relative to her marginal product: (1) heterogeneity in worker-firm-specific preferences (non-wage amenities), (2) firm granularity, and (3) off- and on-the-job search frictions. We use Norwegian data to discipline each channel and then reproduce new reduced-form empirical relationships between market concentration, job flows, wages and wage inequality. In doing so we provide a novel method for clustering occupations into local labor markets. Our main exercise quantifies the contribution of each channel to income inequality and wage markdowns. The average markdown is 21 percent in our baseline estimation. Removing nonwage amenity dispersion narrows them by a third. Giving the next-lowest-ranked competitor a seat at the bargaining table narrows them by half, suggesting that granularity and strategic interactions in the bargaining process is an important source of markdowns. Removing search frictions narrows them by two-thirds. Each counterfactual reduces wage inequality and increases welfare.publishedVersio

Consumption Networks and Local Economic Shocks

This project studies how a local economic shock transmits to firms and workers in other regions via households\u27 consumption behavior. Two unique features allows us to do so. First, newly collected payments data covering the majority of debit card and electronic payments in Norway allows us to break down expenditure into consumption categories purchased at narrow time windows and geographic locations. Second, the collapse in the oil price in 2014 provides a local shock to labor demand, affecting some regions and occupations but not others. This combination allows us to quantify the effect of unemployment risk on the composition of consumption and the indirect effect on workers producing the most severely affected consumption goods in other local labor markets