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Monopsony With Heterogeneous Labour: Evidence From Economic Transition

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  • Richard Disney
  • Jelena Laušev
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    Abstract

    Recent years have seen revived interest in the role of monopsony power in wage-setting in the public sector. Most evidence focuses on individual occupations rather than considering the implications for wage and employment structure where the state has differential monopsony power across different types of workers. A model of monopsony with heterogeneous workers is constructed here. A large scale 'natural experiment' of the consequences of declining monopsony power is the process of economic transition from communist regimes to market-based economies. The paper shows that many salient features of economic transition, such as increasing wage inequality, rising returns to education, rising public sector pay 'markups' and changing employment composition, are compatible with this 'story'.

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    Bibliographic Info

    Paper provided by University of Nottingham, School of Economics in its series Discussion Papers with number 11/11.

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    Handle: RePEc:not:notecp:11/11

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    Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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    Keywords: Monopsony Economic transition Wage structure;

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    1. 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.
    2. Stepan Jurajda & Katherine Terrell, 2002. "Job Growth in Early Transition: Comparing Two Paths," William Davidson Institute Working Papers Series 503, William Davidson Institute at the University of Michigan.
    3. Gabor Kertesi & Janos Kollo, 2000. "Wage Inequality in East-Central Europe," Budapest Working Papers on the Labour Market 0007, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    4. Lokshin, Michael M. & Jovanovic, Branko, 2003. "Wage differentials and state-private sector employment choice in the Federal Republic of Yugoslavia," Policy Research Working Paper Series 2959, The World Bank.
    5. Branko Jovanovic & Michael M. Lokshin, 2004. "Wage Differentials between the State and Private Sectors in Moscow," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(1), pages 107-123, 03.
    6. Fabrizio Coricelli, 1997. "Income distribution and the dynamics of reforms," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 5(2), pages 510-514, November.
    7. Coricelli, F. & Revenga, A., 1992. "Wage Policy During the Transition to a Market Economy: Poland 1990-91," World Bank - Discussion Papers _71, World Bank.
    8. Andrew Newell & Mieczyslaw Socha, 1998. "Wages distribution in Poland: The roles of privatization and international trade, 1992-96," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(1), pages 47-65, 05.
    9. Iva Tomić & Polona Domadenik, 2012. "Matching, adverse selection and labour market flows in a (post)transition setting: the case of Croatia," Post-Communist Economies, Taylor & Francis Journals, vol. 24(1), pages 39-72, September.
    10. Popov, V., 1996. "A Russian Puzzle. What Makes the Russian Economy Transformation a Special Case," Research Paper 29, World Institute for Development Economics Research.
    11. Adamchik, Vera A. & Bedi, Arjun S., 2000. "Wage differentials between the public and the private sectors: evidence from an economy in transition," Labour Economics, Elsevier, vol. 7(2), pages 203-224, March.
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