The Stone Centre is thrilled to host Domencio Ferraro for our 2025-26 Stone Inequality Seminar Series. Ferraro will be presenting his paper, titled “Employment Relationships, Wage Setting, and Labor Market Power.”
Abstract
We ask to what extent the quantification of labor market power depends on the modeling of the long-term worker-firm employment relationship. We develop an oligopsony model with dynamic wage contracts. Workers decide whether and where to work, choosing among firms providing different amenities and solving a dynamic discrete choice labor supply problem with firm-specific human capital. As a result, firms optimally choose wage-tenure contracts to attract and retain workers. We find that such contracts mitigate firms’ incentives to impose large instantaneous wage markdowns—compared to standard static wage-setting models—thereby reducing the share of socially inefficient worker-firm separations. As a consequence, we show that the empirical approaches based on “sufficient statistics” tend to overestimate the extent of labor market power: low levels of firm-specific labor supply elasticities do not necessarily indicate rent extraction but instead reflect firms’ ability to retain workers by offering long-term value through human capital accumulation.
Event Details
Date: November 24, 2025
Time: 3:30 – 5:00pm
Location: Iona 533, 6000 Iona Dr, Vancouver, BC
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Domenico Ferraro earned his bachelor’s degree from the University of Naples Federico II, graduating summa cum laude. He then obtained a Master’s degree in Economics and Finance from the same university, as well as another Master’s degree in Economics from the Universitat Pompeu Fabra in Barcelona, Spain.
After completing his master’s education, he moved to the United States to pursue a PhD in Economics at Duke University, where he graduated in 2014. Following this, he relocated to Arizona to accept a position at the W. P. Carey School of Business at Arizona State University (ASU), where he is currently an Associate Professor of Economics. He teaches macroeconomics at the undergraduate level and also in the PhD program at ASU, having previously taught master’s and PhD courses at Duke University and University of Naples Federico II.
Domenico has published several articles in prestigious academic journals, including the Review of Economic Studies, American Economic Journal: Macroeconomics, Economic Journal, European Economic Review, Review of Economic Dynamics, and Journal of Money, Credit, and Banking. His research covers a wide range of macroeconomic issues, such as the labor market, economic growth, international economics, and the short- and long-term effects of economic policies.