Monopsony and the wage effects of migration

Amior, Michael and Manning, Alan ORCID: 0000-0002-7884-3580 (2020) Monopsony and the wage effects of migration. CEP Discussion Papers (1690). Centre for Economic Performance, LSE, London, UK.

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Abstract

In a competitive labor market, immigration affects native wages only through its impact on marginal products. Under the sole assumption of constant returns, we show that a larger supply of migrants (keeping their skill mix constant) must increase the marginal products of native-owned factors on average (an extension of the familiar “immigration surplus” result); and in the long run (if capital is supplied elastically), this surplus passes entirely to native labor. However, in a monopsonistic labor market, wages will also depend on any mark-downs applied by firms; and immigration may affect native wages through these mark-downs. We present a model of monopsony which generates testable restrictions on the null hypothesis of perfect competition, which we reject using US census data commonly studied in the literature. Our estimates suggest that the (negative) mark-down effect dominates the (by construction, positive) effect on marginal products for the average native. These findings shed new light on the interpretation of previous empirical estimates and the so-called “structural approach” to predicting wage effects.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2020 The Authors
Divisions:	Centre for Economic Performance Economics
Subjects:	H Social Sciences > HD Industries. Land use. Labor J Political Science > JV Colonies and colonization. Emigration and immigration. International migration
JEL classification:	J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc. J - Labor and Demographic Economics > J4 - Particular Labor Markets > J42 - Monopsony; Segmented Labor Markets J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J61 - Geographic Labor Mobility; Immigrant Workers
Date Deposited:	16 Jan 2021 00:37
Last Modified:	15 Sep 2023 23:52
URI:	http://eprints.lse.ac.uk/id/eprint/108454

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