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Minimum Wages, Employment and Monopsonistic Competition

Bhaskar, V and To, Ted (2002) Minimum Wages, Employment and Monopsonistic Competition. Working Paper. University of Essex, Department of Economics, Economics Discussion Papers, Colchester.


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We set out a model of monopsonistic competition, where each employer competes equally with every other employer. The employment effects of minimum wages depend on the degree of distortion in the labor market. If fixed costs per firm are high then the labor market is relatively non-competitive and minimum wages increase employment. Conversely, low fixed costs make for a more competitive labor market where minimum wages reduce employment. This contrasts with the results of a Salop style model with localized employer competition where a minimum wage unambiguously raises employment. We also find that the welfare effect of a small minimum wage is unambiguously positive.

Item Type: Monograph (Working Paper)
Additional Information: Revised August 2003
Uncontrolled Keywords: monopsonistic competition, labor theory, minimum wages, monopsony
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Users 161 not found.
Date Deposited: 28 Aug 2014 14:54
Last Modified: 27 Jan 2016 14:38

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