IDEAS home Printed from https://ideas.repec.org/a/kap/atlecj/v44y2016i1d10.1007_s11293-016-9484-8.html
   My bibliography  Save this article

Monopsony in the Labor Market, Minimum Wages and the Time Horizon: Some Unresolved Issues

Author

Listed:
  • Friedrich L. Sell

    (Universität der Bundeswehr München)

  • Ernst K. Ruf

    (UniCredit Group)

Abstract

This article discusses development of optimal solutions for monopsony in the labour market for the long run (when labour and capital are both flexible). It is shown that binding minimum wages up to a certain degree pushes the monopsonists to choose a high capital intensity of production, just as high as or even higher than that chosen when there is no regulation for minimum wages. Thereby, we demonstrate the existence of re-switching effects in the tradition of Piero Sraffa. The second part of the paper recalculates and analyzes earlier results by making use of the rather general constant elasticity of substitution production function. Based on a numerical solution for optimal monopsony under different regimes (no minimum wage, minimum wages of different values, etc.), we formulate a two-period game between the government and the monopsonistic firm (‘minimum wage game’). Finally, we analyze the relationship between the elasticity of substitution on the one hand and likely levels of employment on the other hand, after introduction of minimum wages.

Suggested Citation

  • Friedrich L. Sell & Ernst K. Ruf, 2016. "Monopsony in the Labor Market, Minimum Wages and the Time Horizon: Some Unresolved Issues," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(1), pages 75-90, March.
    • Handle: RePEc:kap:atlecj:v:44:y:2016:i:1:d:10.1007_s11293-016-9484-8
    DOI: 10.1007/s11293-016-9484-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11293-016-9484-8
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11293-016-9484-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Pierre Cahuc & Guy Laroque, 2014. "Optimal Taxation and Monopsonistic Labor Market: Does Monopsony Justify the Minimum Wage?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(2), pages 259-273, April.
    2. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, December.
    3. Alan Manning, 2006. "A Generalised Model of Monopsony," Economic Journal, Royal Economic Society, vol. 116(508), pages 84-100, January.
    4. Bertram Schefold, 2005. "Reswitching As A Cause Of Instability Of Intertemporal Equilibrium," Metroeconomica, Wiley Blackwell, vol. 56(4), pages 438-476, November.
    5. William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March.
    6. Barr, Tavis & Roy, Udayan, 2008. "The effect of labor market monopsony on economic growth," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1446-1467, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Friedrich L. Sell, 2022. "The Portuguese Dilemma of Unstable Pensions," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 57(6), pages 394-398, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexander Muravyev & Aleksey Oshchepkov, 2013. "Minimum wages and labor market outcomes: evidence from the emerging economy of Russia," HSE Working papers WP BRP 29/EC/2013, National Research University Higher School of Economics.
    2. Muravyev, Alexander & Oshchepkov, Aleksey, 2013. "Minimum Wages, Unemployment and Informality: Evidence from Panel Data on Russian Regions," IZA Discussion Papers 7878, Institute of Labor Economics (IZA).
    3. Ronald Bachmann & Hanna Frings, 2017. "Monopsonistic competition, low-wage labour markets, and minimum wages – An empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 49(51), pages 5268-5286, November.
    4. George Economides & Thomas Moutos, 2016. "Can Minimum Wages Raise Workers’ Incomes in the Long Run?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(6), pages 961-978, December.
    5. Manning, Alan, 2011. "Imperfect Competition in the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 11, pages 973-1041, Elsevier.
    6. David W. Berger & Kyle F. Herkenhoff & Simon Mongey, 2022. "Minimum Wages, Efficiency and Welfare," Opportunity and Inclusive Growth Institute Working Papers 058, Federal Reserve Bank of Minneapolis.
    7. Samuel Muehlemann & Paul Ryan & Stefan C. Wolter, 2013. "Monopsony Power, Pay Structure, and Training," ILR Review, Cornell University, ILR School, vol. 66(5), pages 1097-1114, October.
    8. Laszlo Goerke & Michael Neugart, 2021. "Social preferences, monopsony and government intervention," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(2), pages 864-891, May.
    9. Bachmann, Ronald & Frings, Hanna, 2014. "Monopsony competition and the minimum wage: Evidence from Germany," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100367, Verein für Socialpolitik / German Economic Association.
    10. Belloc, Filippo & D’Antoni, Massimo, 2020. "The Elusive Effect of Employment Protection on Labor Turnover," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 11-25.
    11. Alexander Muravyev & Aleksey Oshchepkov, 2016. "The effect of doubling the minimum wage on employment: evidence from Russia," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-20, December.
    12. Sell, Friedrich L. & Ruf, Ernst K., 2014. "Anmerkungen zum Monopson am Arbeitsmarkt II," Working Papers in Economics 2014,1, Bundeswehr University Munich, Economic Research Group.
    13. Thibaut Lamadon & Magne Mogstad & Bradley Setzler, 2022. "Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market," American Economic Review, American Economic Association, vol. 112(1), pages 169-212, January.
    14. Chen, Yi & Jungbauer, Thomas & Wang, Zhe, 2023. "The strategic decentralization of recruiting," Journal of Economic Theory, Elsevier, vol. 209(C).
    15. Wei-Bin Zhang, 2020. "Monopsony and Discrimination in Labor Market in the Solow-Stiglitz Two-Group Neoclassical Growth Model," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 6(1), pages 1-19, June.
    16. Jeremy T. Fox, 2010. "Estimating the Employer Switching Costs and Wage Responses of Forward-Looking Engineers," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 357-412, April.
    17. Holzer, Harry J., 2008. "Living Wage Laws: How Much Do (Can) They Matter?," IZA Discussion Papers 3781, Institute of Labor Economics (IZA).
    18. Guido Friebel & Sergei Guriev, 2000. "Should I Stay or Can I Go? Worker Attachment in Russia," Working Papers w0008, Center for Economic and Financial Research (CEFIR).
    19. E. Gautier & D. Fougère & S. Roux, 2016. "The Impact of the National Minimum Wage on Industry-Level Wage Bargaining in France," Working papers 587, Banque de France.
    20. Hernán Vallejo, 2007. "A generalized index of market power," Revista de Economía del Rosario, Universidad del Rosario, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:atlecj:v:44:y:2016:i:1:d:10.1007_s11293-016-9484-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.