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Dealing with monopsony power: the case for using employment subsidies

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  • STROBL, Eric
  • WALSH, Frank

Abstract

We show in a monopsony model that a minimum wage may raise hours which are already too high but has ambiguous effects on the number of employees and utility. Employment subsidies, in contrast, unambiguously improve worker utility and bring the market equilibrium closer to the efficient outcome.

Suggested Citation

  • STROBL, Eric & WALSH, Frank, 2003. "Dealing with monopsony power: the case for using employment subsidies," LIDAM Discussion Papers CORE 2003079, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2003079
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2003.html
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    References listed on IDEAS

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    1. Lawrence Katz & Alan Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," Working Papers 678, Princeton University, Department of Economics, Industrial Relations Section..
    2. Lawrence F. Katz & Alan B. Krueger, 1992. "The Effect of the Minimum Wage on the Fast-Food Industry," ILR Review, Cornell University, ILR School, vol. 46(1), pages 6-21, October.
    3. Alan B. Krueger & David Card, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply," American Economic Review, American Economic Association, vol. 90(5), pages 1397-1420, December.
    4. William Wascher & David Neumark, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Comment," American Economic Review, American Economic Association, vol. 90(5), pages 1362-1396, December.
    5. De Fraja, Gianni, 1999. "Minimum Wage Legislation, Productivity and Employment," Economica, London School of Economics and Political Science, vol. 66(264), pages 473-488, November.
    6. 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.
    7. Sara Connolly & Mary Gregory, 2002. "The National Minimum Wage and Hours of Work: Implications for Low Paid Women," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(s1), pages 607-631, August.
    8. Kenneth A. Couch & David C. Wittenburg, 2001. "The Response of Hours of Work to Increases in the Minimum Wage," Southern Economic Journal, John Wiley & Sons, vol. 68(1), pages 171-177, July.
    9. repec:fth:prinin:298 is not listed on IDEAS
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    Cited by:

    1. Cyril Hariton & Gwenaël Piaser, 2007. "When Redistribution Leads to Regressive Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(4), pages 589-606, August.
    2. Girma, Sourafel & Görg, Holger & Strobl, Eric & Walsh, Frank, 2008. "Creating jobs through public subsidies: An empirical analysis," Labour Economics, Elsevier, vol. 15(6), pages 1179-1199, December.

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    More about this item

    Keywords

    monopsony power; minimum wages; employment subsidies;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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