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Oligopsony and the Distribution of Wages

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Author Info
V. Bhaskar (University of Essex)
Ted To (University of Warwick)

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Abstract

A number of theories (search and efficiency wages) have been developed, in part, to explain why identically able workers are often paid different wages. However, when there is a minimum wage, they do not explain the resulting ``spike" in the wage distribution. Our model's predictions are consistent with this evidence. We assume that workers are equally able but have heterogeneous preferences for non-wage characteristics, while employers have heterogeneous productivity characteristics. This results in a model of labor market oligopsony where ``inside'' and ``outside'' forces interact, producing wage dispersion as well as a spike at the minimum wage.

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Paper provided by EconWPA in its series Labor and Demography with number 9903003.

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Date of creation: 18 Mar 1999
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Handle: RePEc:wpa:wuwpla:9903003

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Related research
Keywords: wage differentials; wage dispersion; monopsony; oligopsony; labor theory; minimum wage;

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Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1992. "Wages, Profits and Rent-Sharing," NBER Working Papers 4222, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. V. Bhaskar & Ted To, 1996. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Labor and Demography 9603001, EconWPA, revised 21 May 1996. [Downloadable!]
    Other versions:
  3. Hamilton, Jonathan & Thisse, Jacques-François & Zenou, Yves, 1999. "Wage Competition with Heterogeneous Workers and Firms," CEPR Discussion Papers 2141, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. William T. Dickens & Lawrence F. Katz, 1987. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring. [Downloadable!] (restricted)
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    Other versions:
  7. Alan B. Krueger & Lawrence H. Summers, 1987. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March. [Downloadable!] (restricted)
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    Other versions:
  10. Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F., 1997. "The effects of minimum bargained wages on earnings: Evidence from Spain," European Economic Review, Elsevier, vol. 41(3-5), pages 713-721, April. [Downloadable!] (restricted)
    Other versions:
  11. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. 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. [Downloadable!] (restricted)
  13. William T. Dickens & Lawrence F. Katz, 1987. "Inter-Industry Wage Differences and Theories of Wage Determination," NBER Working Papers 2271, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Pugel, Thomas A, 1980. "Profitability, Concentration and the Interindustry Variation in Wages," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 248-53, May. [Downloadable!] (restricted)
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    Other versions:
  18. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March. [Downloadable!] (restricted)
  19. Stiglitz, Joseph E, 1985. "Equilibrium Wage Distribution," Economic Journal, Royal Economic Society, vol. 95(379), pages 595-618, September. [Downloadable!] (restricted)
    Other versions:
  20. Groshen, Erica L, 1991. "Sources of Intra-industry Wage Dispersion: How Much Do Employers Matter?," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 869-84, August. [Downloadable!] (restricted)
  21. Abowd, John M & Lemieux, Thomas, 1993. "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 983-1014, November. [Downloadable!] (restricted)
    Other versions:
  22. Jeremy I. Bulow & Lawrence H. Summers, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy, Discrimination and Keynesian Unemployment," NBER Working Papers 1666, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  23. Ramaswamy, Ramana & Rowthorn, Robert E, 1991. "Efficiency Wages and Wage Dispersion," Economica, London School of Economics and Political Science, vol. 58(232), pages 501-14, November. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Goto, Hideaki, 2008. "Labor Market Competitiveness and Poverty," Working Papers 51159, Cornell University, Department of Applied Economics and Management. [Downloadable!]
  2. Natalya Y. Shelkova, 2009. "Collusion at the Non-Binding Minimum Wage: An Automatic Stabilizer?," Working papers 2009-41, University of Connecticut, Department of Economics. [Downloadable!]
  3. Ludsteck, Johannes, 2006. "Employment effects of centralization in wage setting in a median voter model," IAB Discussion Paper 200602, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
  4. Mirco, Tonin, 2006. "The Effects of the Minimum Wage in an Economy with Tax Evasion," Seminar Papers 747, Stockholm University, Institute for International Economic Studies. [Downloadable!]
  5. L. Kaas & P. Madden, 2006. "Minimum Wages and Welfare in a Hotelling Duopsony," The School of Economics Discussion Paper Series 0604, Economics, The University of Manchester. [Downloadable!]
    Other versions:
  6. Paul Madden, 2009. "Modelling strategic interactions in sport leagues," The School of Economics Discussion Paper Series 0909, Economics, The University of Manchester. [Downloadable!]
  7. Booth, Alison L. & Francesconi, Marco & Zoega, Gylfi, 2002. "Oligopsony, Institutions and the Efficiency of General Training," IZA Discussion Papers 618, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Andrea Bassanini & Alison Booth & Giorgio Brunello & Maria De Paola & Edwin Leuven, 2005. "Workplace Training in Europe," IZA Discussion Papers 1640, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Domenico Tabasso, 2009. "Temporary Contracts and Monopsony Power in the UK Labour Market," Economics Discussion Papers 675, University of Essex, Department of Economics. [Downloadable!]
  10. V. Bhaskar & Alan Manning & Ted To, 2002. "Oligopsony and Monopsonistic Competition in Labor Markets," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 155-174, Spring. [Downloadable!] (restricted)
  11. Gerda Dewit & Dermot Leahy, 2009. "Oligopsonistic Cats and Dogs," Review of Industrial Organization, Springer, vol. 35(3), pages 257-274, November. [Downloadable!] (restricted)
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