Dynamic monopsony suggests that, due to labour market frictions, workers will be paid below their productivity. This paper uses the stochastic frontier technique to estimate the degree of this underpayment for UK employees. It finds evidence of significant underpayment. The estimates are used to examine whether the predictions of dynamic monopsony are empirically accurate. No conclusive evidence against this theoretical framework is found. The paper also investigates whether payment according to productivity is a sufficient condition for the elimination of the "working poor" problem. Due to the existence of an unemployment barrier, it finds that the minimum wage is not an effective anti-poverty policy. Copyright 2000 by Taylor and Francis Group
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Article provided by Taylor and Francis Journals in its journal Applied Economics.
Volume (Year): 32 (2000) Issue (Month): 4 (March) Pages: 429-40 Download reference. The following formats are available: HTML
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