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Monopsony power, pay structure and training

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  • Samuel Muehlemann

    ()
    (University of Bern & IZA Bonn)

  • Paul Ryan

    (KingÕs College Cambridge)

  • Stefan C. Wolter

    (University of Bern, CESifo & IZA Bonn)

Abstract

Although interest in monopsonistic influences on labour market outcomes has revived in recent years, only a few empirical studies provide direct evidence on it. This paper analyses empirically the effect of monopsony power on pay structure, using a direct measure of labour market ÔthinnessÕ. We find that having fewer competitors for skilled labour is associated at the level of the establishment with lower pay for both skilled labour and trainees, but not for unskilled labour. These findings have potentially important implications for the economic theory of training, as most recent models assume that skilled pay is set monopolistically but both unskilled and trainee pay are determined competitively. Our results support those assumptions for skilled pay and unskilled pay, but not for trainee pay.

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File URL: http://repec.business.uzh.ch/RePEc/iso/leadinghouse/0099_lhwpaper.pdf
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Bibliographic Info

Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Economics of Education Working Paper Series with number 0099.

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Length: 36 pages
Date of creation: Mar 2011
Date of revision:
Publication status: published
Handle: RePEc:iso:educat:0099

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Keywords: Monopsony; wage differentials; firm-sponsored training.;

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References

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  1. Boris Hirsch & Thorsten Schank & Claus Schnabel, 2010. "Differences in Labor Supply to Monopsonistic Firms and the Gender Pay Gap: An Empirical Analysis Using Linked Employer-Employee Data from Germany," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 291-330, 04.
  2. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory And Evidence," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 78-118, February.
  3. Hamilton, Jonathan & Thisse, Jacques-Francois & Zenou, Yves, 2000. "Wage Competition with Heterogeneous Workers and Firms," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 453-72, July.
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  5. Stevens, Margaret, 1999. "Human Capital Theory and UK Vocational Training Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 15(1), pages 16-32, Spring.
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  7. Stevens, Margaret, 2001. "Should Firms Be Required to Pay for Vocational Training?," Economic Journal, Royal Economic Society, vol. 111(473), pages 485-505, July.
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  10. Regina Dionisius & Samuel Muehlemann & Harald Pfeifer & Günter Walden & Felix Wenzelmann & Stefan C. Wolter, 2009. "Costs and Benefits of Apprenticeship Training. A Comparison of Germany and Switzerland," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 55(1), pages 7-37.
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  15. Muehlemann, Samuel & Pfeifer, Harald & Walden, Günter & Wenzelmann, Felix & Wolter, Stefan C., 2010. "The financing of apprenticeship training in the light of labor market regulations," Labour Economics, Elsevier, vol. 17(5), pages 799-809, October.
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Citations

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Cited by:
  1. Paul Ryan, 2011. "Apprenticeship: between theory and practice, school and workplace," Economics of Education Working Paper Series 0064, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Oct 2011.
  2. Anika Jansen & Mirjam Strupler Leiser & Felix Wenzelmann & Stefan C. Wolter, 2012. "The effect of labor market regulations on training behavior and quality: the German labor market reform as a natural experiment," Economics of Education Working Paper Series 0083, University of Zurich, Institute for Strategy and Business Economics (ISU).
  3. Fries, Jan & Göbel, Christian & Maier, Michael F., 2013. "Do employment subsidies reduce early apprenticeship dropout?," ZEW Discussion Papers 13-053, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Paul Ryan & Uschi Backes-Gellner & Silvia Teuber & Karin Wagner, 2012. "Apprentice pay in Britain, Germany and Switzerland: institutions, market forces, market power," Economics of Education Working Paper Series 0075, University of Zurich, Institute for Strategy and Business Economics (ISU).

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