Monopsony in the Labor Market

The idea that firms have some market power in wage-setting has been slow to gain acceptance in economics. Indeed, until relatively recently, the textbooks viewed monopsony power as either a theoretical curiosum, or a concept limited to a handful of company towns in the past. 1 This view has been changing rapidly, driven by a combination of theoretical innovations, empirical findings, dramatic legal cases, and new data sets that make it possible to measure the degree of market power in different ways. A search of the EconLit database shows that the number of published journal articles mentioning "monopsony" rose from only two in the 1980s to 20 in the 1990s, 32 in the 2000s, and to 64 in the 2010s. This volume…