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Imperfect Competition, Compensating Differentials and Rent Sharing in the U.S. Labor Market Thibaut LamadonMagne MogstadBradley SetzlerFirst version: June 2017. This version: December 2020.Abstract

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How to fill out imperfect competition compensating differentials

01

Identify the compensating differentials in the labor market due to factors like job risks, location, working conditions, or non-wage benefits.

02

Calculate the monetary value of these compensating differentials by assessing the trade-off between higher wages and the undesirable aspects of the job.

03

Adjust the wage rates to reflect these compensating differentials in order to attract workers to jobs with less desirable characteristics.

Who needs imperfect competition compensating differentials?

01

Employers who operate in markets with imperfect competition where they have some degree of market power to set wage rates based on factors other than just supply and demand.

02

Workers who are willing to trade off higher wages for jobs with compensating differentials such as better working conditions, flexible hours, or additional benefits.

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What is imperfect competition compensating differentials?

Imperfect competition compensating differentials refer to the wage differences that arise in labor markets due to variations in job characteristics, labor market conditions, or employer-specific factors, where competition is not perfect.

Who is required to file imperfect competition compensating differentials?

Typically, employers who operate in markets exhibiting imperfect competition and provide wages that vary from the market rates must file reports pertaining to compensating differentials.

How to fill out imperfect competition compensating differentials?

To fill out imperfect competition compensating differentials, employers should gather relevant data on wages, job characteristics, and market conditions, then complete the required forms accurately following the guidelines provided by the relevant filing authority.

What is the purpose of imperfect competition compensating differentials?

The purpose of imperfect competition compensating differentials is to account for the adjustments in wages that compensate workers for differences in job conditions, such as risk, skill requirements, or working hours, thereby ensuring efficient labor market outcomes.

What information must be reported on imperfect competition compensating differentials?

Employers must report information related to wage rates, job descriptions, employee classifications, and any specific conditions that justify wage differentials in relation to the market.

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