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Oligopsony and the distribution of wages

  • Bhaskar, V.
  • To, Ted

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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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 47 (2003)
Issue (Month): 2 (April)
Pages: 371-399

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Handle: RePEc:eee:eecrev:v:47:y:2003:i:2:p:371-399
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