Holdup in oligopsonistic labour markets - a new role for the minimum wage
AbstractWe consider a labour market model of oligopsonistic wage competition and show that there is a holdup problem although workers do not have any bargaining power. When a firm invests more, it pays a higher wage in order to attract workers from competitors. Because workers participate in the returns on investment while only firms bear the costs, investment is inefficiently low. A binding minimum wage can achieve the first-best level of investment, both in the short run for a given number of firms and in the long run when the number of firms is endogenous.
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Bibliographic InfoArticle provided by Elsevier in its journal Labour Economics.
Volume (Year): 15 (2008)
Issue (Month): 3 (June)
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Web page: http://www.elsevier.com/locate/labeco
Other versions of this item:
- Kaas, Leo & Madden, Paul, 2006. "Holdup in Oligopsonistic Labour Markets: A New Role for the Minimum Wage," IZA Discussion Papers 2043, Institute for the Study of Labor (IZA).
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
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