Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market
The authors build and estimate an equilibrium model of imperfect competition in the US labor market using linked employer-employee administrative data, combining firm-level productivity shocks with worker mobility. They quantify the degree of employer wage-setting power (monopsony), how firms share rents with workers, and the role of compensating differentials for non-wage amenities. They find that firms have substantial market power and pass through only part of productivity gains to wages, while amenities matter for worker sorting.