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Estimating the Firm's Labor Supply Curve in a "New Monopsony" Framework: School Teachers in Missouri

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  • Michael R. Ransom

    (Brigham Young University)

  • David P. Sims

    (Brigham Young University)

Abstract

In the context of certain dynamic models of monopsony, 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 take advantage of the plausibly exogenous variation in pre-negotiated district salary schedules to instrument for actual salary. Instrumental variables estimates lead to a labor supply elasticity estimate of about 3.65, suggesting the presence of significant market power for school districts, especially over more experienced teachers. This is partially explained by institutional features of the teacher labor market.

Suggested Citation

  • Michael R. Ransom & David P. Sims, 2008. "Estimating the Firm's Labor Supply Curve in a "New Monopsony" Framework: School Teachers in Missouri," Working Papers 1108, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:538
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    References listed on IDEAS

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    More about this item

    Keywords

    monopsony papers; labor supply elasticity; public schools; Missouri;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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