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Comment on 'minimum wages for ronald mcdonald monopsonies: a theory of monopsonistic competition'

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  • Frank Walsh

Abstract

Bhaskar and To (1999) develop a model of monopsonistic competition and solve explicitly for equilibrium. While a minimum wage set just above the unconstrained optimum leads firms to increase employment it also causes firm exit as profits fall. In this note I show that the employment and welfare effects of the minimum wage which Bhaskar and To had thought to be ambiguous when firm exit was accounted for are in fact unambiguously positive. The model can be adjusted so that the original ambiguous employment effect results. A decomposition is developed which allows us to calculate the long-run employment effect. Copyright 2003 Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 113 (2003)
Issue (Month): 489 (07)
Pages: 718-722

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Handle: RePEc:ecj:econjl:v:113:y:2003:i:489:p:718-722

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Cited by:
  1. L. Kaas & P. Madden, 2006. "Minimum Wages and Welfare in a Hotelling Duopsony," The School of Economics Discussion Paper Series 0604, Economics, The University of Manchester.
  2. Strobl, Eric & Walsh, Frank, 2011. "The ambiguous effect of minimum wages on hours," Labour Economics, Elsevier, vol. 18(2), pages 218-228, April.
  3. V. Bhaskar & Ted To, 2002. "Minimum Wages in a Symmetric Model of Monopsonistic Competition," Economics Discussion Papers 548, University of Essex, Department of Economics.
  4. Eric Strobl & Frank Walsh, 2014. "Monopsony, Minimum Wages and Migration," Working Papers 2014-069, Department of Research, Ipag Business School.
  5. Moser, Christoph & Stähler, Nikolai, 2009. "Spillover effects of minimum wages in a two-sector search model," Discussion Paper Series 1: Economic Studies 2009,01, Deutsche Bundesbank, Research Centre.
  6. Alan Manning & Ted To, 2002. "Oligopsony and Monopsonistic Competition in Labor Markets," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 155-174, Spring.

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