Immigration, monopsony and the distribution of firm pay

Amior, Michael and Stuhler, Jan (2024) Immigration, monopsony and the distribution of firm pay. CEP Discussion Papers (CEPDP1971). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

We argue that the arrival of immigrants with low reservation wages can strengthen the monopsony power of firms. Firms can exploit "cheap" migrant labor by offering lower wages, though at the cost of forgoing potential native hires who demand higher wages. This monopsonistic trade-off can lead to large negative effects on native employment, which exceed those in competitive models, and which are concentrated among low-paying firms. To validate these predictions, we study changes in wage premia and employment across the firm pay distribution, during a large immigration wave in Germany. These adverse effects are not inevitable and may be ameliorated through policies which constrain firms' monopsony power over migrants.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2024 The Author(s)
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
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 J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
Date Deposited:	06 Feb 2025 16:36
Last Modified:	06 Feb 2025 16:36
URI:	http://eprints.lse.ac.uk/id/eprint/126815

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