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Genre = Economics, Labor
A great book on the bargaining power relations in the labor market. The standard labor models assume too much such as perfect information and labor obtaining its marginal product of labor. This book questions those models and shows other models that can better express how workers and employers make labor market decisions. The aim of this book is to show that the labor market is not as frictionless as the standard models are, that there have a variety of market barriers that alter bargaining power usually in favor of the firm.
Rather than having a strict sense of monopsony, as many article and textbooks hold to, that of there being only one buyer, the monopsony case presented expresses it in the ability to obtain rents. Manning shows that many labor economists avoid the discussion of rents due to the model specifications. Rents due to the bargaining power of workers and employees not being at parity. Throughout the book, various frictions used to represent a more realistic account of how the labor market operates. The big take away from this book, the only idea that is consistent within all models, is that the more elastic the demand for labor, the more power firms have.
This book is an example of how statistical analysis is meant to be done. Maybe the presentation could be better, but going through all the details to prove that the statistics is some sort of reliability is a boon. Math, models, and statistics have not really shaped decisive movements in economics due to their unreliability to express the theory well, but Manning does a wonderful job at showing the level of research it takes to have a decently reliable model. Presenting the reasons why the standard models are sometimes even counterintuitive and the more realistic model shows the contrasts very clearly.
There are two problems with this book. Labor economics is not recent phenomena and the models presented have been discussed since Adam Smith, but they are presented as something startling. This book makes the point that looking at frictions and alternatives to the Neoclassical views is more or less relatively new. It may be true that the standard models lack a good understanding of the labor process, but their alternatives are actually older than the standard models.
The second problem is that this book goes against the Neoclassical models, wants them to improve. It is not a problem of wanting to improve the models, but it is a problem with using the same constraints and other details that the standard models use. This book does not separate the models far enough from the Neoclassical models. The best example of this is that optimization and maximum profit are kept the same. Keeping with the same framework limits these alternative models to the same explanations.
Overall, this book tries to defend the alternative statistical model and going against the standard models. Due to the math and statistic needed to understand most of the models, this book should be recommended at those already have experience with labor economics theories and want improve and to understand the possible alternatives. There are many takeaways that a labor economics and policy shapers can use in making policies.
Pages to read: 365
1st Edition: 2003
Ratings out of 5: