Comment on 'minimum wages for ronald mcdonald monopsonies: a theory of monopsonistic competition'
AbstractBhaskar 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 InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 113 (2003)
Issue (Month): 489 (07)
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- Leo Kaas & Paul Madden, 2010.
"Minimum wages and welfare in a Hotelling duopsony,"
Springer, vol. 43(2), pages 167-188, May.
- Kaas, Leo & Madden, Paul, 2008. "Minimum Wages and Welfare in a Hotelling Duopsony," IZA Discussion Papers 3434, Institute for the Study of Labor (IZA).
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- 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.
- Strobl, Eric & Walsh, Frank, 2011. "The ambiguous effect of minimum wages on hours," Labour Economics, Elsevier, vol. 18(2), pages 218-228, April.
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