Employer Monopsony Power In The Labor Market For Undocumented Workers

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Executive Summary

Using matched employer-employee data from the state of Georgia, this paper investigates the potential for employer monophony power in the labor market for undocumented workers. The authors find that the labor supply elasticity of undocumented workers is about 13 percent lower than that estimated for documented workers, suggesting that at least some of the observed wage gap between documented and undocumented workers can be explained by firms' exploiting their monophony power. There is also evidence of some displacement, with the hiring of undocumented workers being associated with a small amount of documented worker separation.

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