New Market Power Models and Sex Differences in Pay

Abstract

In the context of certain general equilibrium search models, 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. We use this framework to estimate the elasticity of labor supply for men and women workers at a chain of grocery stores operating in the southwestern United States, identifying separation elasticities from differences in wages and separation rates across different job titles within the firm. We estimate elasticities of labor supply to the firm of about 2.7 for men and about 1.5 for women, suggesting significant wage-setting power for the firm. Since women have lower elasticities of labor supply to the firm, a Robinson-style monopsony model might explain lower relative pay of women in the grocery industry. The wage gaps we observe among workers in US retail grocery stores are close to what the monopsony model predicts for the elasticities we have estimated.