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Dealing with monopsony power: Employment subsidies vs. minimum wages

Author

Listed:
  • Eric Strobl

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique)

  • Frank Walsh

    (School of Economics - UCD - University College Dublin [Dublin])

Abstract

We show in a monopsony model that accounting for changes in hours a minimum wage has ambiguous effects on employment and welfare. When all workers have the same preference ordering over leisure and consumption employment subsidies unambiguously improve welfare. Many countries have minimum wages and also tax minimum wage workers.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Eric Strobl & Frank Walsh, 2007. "Dealing with monopsony power: Employment subsidies vs. minimum wages," Post-Print hal-00395607, HAL.
    • Handle: RePEc:hal:journl:hal-00395607
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    References listed on IDEAS

    as
    1. 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.
    2. Mark B. Stewart & Joanna K. Swaffield, 2008. "The Other Margin: Do Minimum Wages Cause Working Hours Adjustments for Low‐Wage Workers?," Economica, London School of Economics and Political Science, vol. 75(297), pages 148-167, February.
    3. 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.
    4. 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(supplemen), pages 607-631, December.
    5. 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.
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    11. repec:fth:prinin:298 is not listed on IDEAS
    12. Strobl, Eric & Walsh, Frank, 2002. "Getting It Right: Employment Subsidy or Minimum Wage?," IZA Discussion Papers 662, Institute of Labor Economics (IZA).
    13. 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..
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    17. Connolly, Sara & Gregory, Mary, 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(0), pages 607-631, Supplemen.
    18. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-273, May.
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    Citations

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    Cited by:

    1. Eliav Danziger & Leif Danziger, 2018. "The Optimal Graduated Minimum Wage and Social Welfare," CESifo Working Paper Series 6943, CESifo.
    2. Danziger, Eliav & Danziger, Leif, 2018. "The Optimal Graduated Minimum Wage and Social Welfare," IZA Discussion Papers 11386, Institute of Labor Economics (IZA).
    3. 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.
    4. Strobl, Eric & Walsh, Frank, 2011. "The ambiguous effect of minimum wages on hours," Labour Economics, Elsevier, vol. 18(2), pages 218-228, April.
    5. Eric Strobl & Frank Walsh, 2010. "The minimum wage and hours per worker," Working Papers 201028, School of Economics, University College Dublin.
    6. Eric Strobl & Frank Walsh, 2007. "The Ambiguous Effect of Minimum Wages on Workers and Total Hours," Working Papers 200714, School of Economics, University College Dublin.
    7. Danziger, Eliav & Danziger, Leif, 2018. "The Optimal Graduated Minimum Wage and Social Welfare," GLO Discussion Paper Series 188, Global Labor Organization (GLO).
    8. Peng-Ju Su, Alice, 2020. "Information advantage and minimum wage," Information Economics and Policy, Elsevier, vol. 50(C).
    9. Cai Yujie & Li Xiuyu & Tao Yuhong, 2020. "Comparative Analysis of Minimum Wage in Five Provinces in Northwest China," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(1), pages 1-1, January.

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    More about this item

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy

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