Essays on imperfect competition in the labor market

Abstract

This thesis consists of three chapters on imperfect competition in the labor market. The first chapter (joint with Nikolaj Harmon) explores the relationship between an individual's wages and the quality of her opportunities at other firms (her outside options). To overcome the fact that many factors that shift an individual's outside opportunities also impact her productivity at her current job, we develop a novel identification strategy that generates within-individual (and within-firm-by-occupation) variation in workers' information about their outside options. This strategy, which we implement using linked employer-employee data from Denmark, exploits the fact that individuals often learn about labor market opportunities through their social networks. We find that increases in labor demand at former coworkers' current firms increases an incumbent worker's job-to-job mobility and wage growth.

Consistent with theory, larger changes are necessary to induce a job-to-job transition than to induce a wage gain. Tests that exploit within-firm or within-firm-and-occupation variation and tests that exploit different subsets of an individual's former coworkers confirm that the results are not driven by unobserved changes in demand for workers' skills. Finally, we use our reduced form moments to identify a structural search model incorporating both posting and bargaining firms. We find that bargaining is more prevalent among high skilled workers. The second chapter (joint with Oren Danieli) investigates the role that cross-sectional differences in individuals' outside options play in generating between-group wage inequality. We use a two-sided matching model to micro-found a measure of workers' outside options, which we call the "Outside Options Index" (001). The index is similar to those used in the industrial organization literature to measure concentration (e.g.

the Herfindal-Hirschman Index, the HHI). We then use German administrative data to estimate this index and use two sources of quasi-random variation: (1) the introduction of high-speed trains and (2) a standard shift-share instrument to identify the elasticity between our index and wages. When we combine these two ingredients, we find that roughly 1/3 of the gender wage gap in Germany can be explained by differences in options, mostly the result of differences in effective labor market size (commuting costs). The third chapter (joint with Emily Oehlsen) asks whether, in the absence of commuting costs, firms with market power have an incentive to pay women less than men. We use data from a series of experiments at Uber where we offered random subsets of male and female drivers higher "wages". Drivers varied both in the size of the wage increase and in whether they could drive for Uber's main competitor, Lyft.

These two sources of variation allow us to experimentally identify: (1) Frisch elasticities and (2) firm substitution elasticities. We find that women have Frisch elasticities double those of men on both the intensive and extensive margin. However, unlike the prior literature, we find that women are not less likely to shift between firms in response to changes in relative wages. The results suggest that, at least in the gig economy, firms have little incentive to wage discriminate between men and women based on their labor supply choices. JEL Codes: JOO, J31, J42