Testing for Employer Monopsony in Turn-of-the-Century Coal Mining

Isolated company towns are often cited as likely examples of labor monopsony. This article tests for monopsony power by estimating inverse labor supply elasticities using a county-level panel dataset on nonunion West Virginia coal mining from 1897 to 1932. The model specification incorporates dynamics in such a way that an estimate of the gap between marginal revenue product and the wage can easily be computed as a weighted average of short- and long-run inverse elasticities. Modest estimated short-run inverse elasticities and very small long-run inverse elasticities imply that coal operators enjoyed little, if any, monopsony power over their workers.