Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition
AbstractRecent empirical work on the effects of minimum wages has called into question the conventional wisdom that minimum wages invariably reduce employment. The authors develop a model of monopsonistic competition with free entry to analyze the effects of minimum wages and their predictions fit the empirical results closely. Under monopsonistic competition, they find that a rise in the minimum wage raises employment per firm, causes firm exit, and may increase or reduce industry employment. Minimum wages increase welfare if they raise industry employment but welfare effects are ambiguous if employment falls.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 109 (1999)
Issue (Month): 455 (April)
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Other versions of this item:
- V. Bhaskar & Ted To, 1996. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Labor and Demography 9603001, EconWPA, revised 21 May 1996.
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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