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We quantify the importance of imperfect competition in the US labor market by estimating the size of labor market rents earned by American firms and workers. We construct a matched employer-employee panel dataset by combining the universe of US business and worker tax records for the period 2001–2015. Using this panel data, we identify and estimate an equilibrium model of the labor market with two-sided heterogeneity where workers view firms as imperfect substitutes because of heterogeneous preferences over nonwage job characteristics. The model allows us to draw inference about imperfect competition, worker sorting, compensating differentials, and rent sharing. (JEL D24, H24, H25, J22, J24, J31, J42)
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This content will become publicly available on March 1, 2026
Overcoming the agglomeration paradox: skill-dependent FDI and urbanization in China
Abstract The influx of foreign capital into cities in developing countries creates new labor demands, triggering significant internal migration as workers move for opportunities. But this mobilization creates a management problem for local governments. How do local officials manage competing interests in developing their labor market while preventing governance problems from excessive demand on public resources? Using the highly institutionalized case of China, I argue that local governments encourage long-term migration of “desirable” migrants by integrating them into social services while keeping others out. Variation in locally invested FDI skill dependence drives variation in inclusivity towards internal migrants. Policies that facilitate the integration of internal migrants into local urban welfare systems correlate with investment in firms with greater dependence on high-skilled workers, especially when investment flows to firms established more than one year previously. These trends are strongest in eastern municipalities where market forces play a larger role in local development policies.
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- Award ID(s):
- 2238897
- PAR ID:
- 10600434
- Publisher / Repository:
- Journal of Public Policy
- Date Published:
- Journal Name:
- Journal of Public Policy
- Volume:
- 45
- Issue:
- 1
- ISSN:
- 0143-814X
- Page Range / eLocation ID:
- 120 to 145
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
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