In two recent papers, Matthew E. Kahn and Joseph Tracy examine the outcomes of local labor markets affected by monopsony power. They find that in areas with a high degree of monopsony power, workers earn lower wages but are compensated with lower house prices, at the expense of homeowners. Monopsony markets also experience a “brain drain” over time due to young, educated workers who leave for better opportunities. The rise of work-from-home may accelerate this dynamic by allowing talent to change labor markets without changing residences.
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