The effect of labor market monopsony on economic growth
AbstractIn this endogenous growth model, a minimum efficient scale of production and workers' home-to-work travel costs combine to give firms monopsony power, and this monopsony power leads to slower growth. Monopsony drives the wage below the marginal product of labor. This lower wage leads to lower investment in human capital and thereby to a lower growth rate. This makes investment in human capital - and therefore the growth rate - suboptimal. We provide evidence from a cross-country panel to support our model: Urbanization, which we assume is determined by a country's exogenous population density and cropland area, positively impacts the wage share of output; the wage share positively impacts educational attainment; higher-income countries have higher wage shares; and within-country upticks in the wage share have a positive lagged effect on the growth rate.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Macroeconomics.
Volume (Year): 30 (2008)
Issue (Month): 4 (December)
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Web page: http://www.elsevier.com/locate/inca/622617
O57 J42 L13 Economic growth Human capital Monopsony Wage share;
Find related papers by JEL classification:
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
- 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
- Eco - Macroeconomics and Monetary Economics - - - - -
- gro - - - - - -
- Hum - Public Economics - - - - -
- cap - - - - - -
- Mon - Business Administration and Business Economics; Marketing; Accounting - - - - -
- Wag - - - - - -
- sha - - - - - -
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