Monopsony with Recruiting

68 Pages Posted: 9 Jan 2025 Last revised: 14 Nov 2024

See all articles by Justin Bloesch

Justin Bloesch

Cornell University - School of Industrial and Labor Relations; Cornell University - Department of Economics; Cornell University, Ithaca, New York

Birthe Larsen

Copenhagen Business School - Department of Economics

Anders Yding

University of California, Berkeley

Date Written: November 13, 2024

Abstract

We develop a tractable model of monopsony where firms use wages and recruiting expenditures to attract workers. The model predicts that firms' labor supply curves are elastic in the long run, consistent with evidence that firms pay higher wages while growing, but the wage premium at large firms is small. We confirm these predictions using the effect of export demand shocks on the wage growth of job switchers in Denmark. Our results imply that monopsony rents are dissipated by recruiting costs, which can reconcile existing estimates of monopsony power with the profit share of national income in rich countries.

Suggested Citation

Bloesch, Justin and Larsen, Birthe and Yding, Anders, Monopsony with Recruiting (November 13, 2024). Available at SSRN: https://ssrn.com/abstract=5020154 or http://dx.doi.org/10.2139/ssrn.5020154

Justin Bloesch (Contact Author)

Cornell University - School of Industrial and Labor Relations ( email )

Ithaca, NY 14853-3901
United States

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

Cornell University, Ithaca, New York ( email )

New York
United States

Birthe Larsen

Copenhagen Business School - Department of Economics ( email )

Porcelænshaven 16 A
Copenhagen F, DK-2000
Denmark
(+45) 61 79 45 25 (Phone)

Anders Yding

University of California, Berkeley ( email )

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