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Monopsony power, pay structure and training

  • Samuel Muehlemann

    ()

    (University of Bern & IZA Bonn)

  • Paul Ryan

    (KingÕs College Cambridge)

  • Stefan C. Wolter

    (University of Bern, CESifo & IZA Bonn)

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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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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  6. Dionisius, Regina & Mühlemann, Samuel & Pfeifer, Harald & Walden, Günter & Wenzelmann, Felix & Wolter, Stefan C., 2008. "Cost and Benefit of Apprenticeship Training: A Comparison of Germany and Switzerland," IZA Discussion Papers 3465, Institute for the Study of Labor (IZA).
  7. Boris Hirsch & Thorsten Schank & Claus Schnabel, 2008. "Differences in Labor Supply to Monopsonistic Firms and the Gender Pay Gap: An Empirical Analysis Using Linked Employer-Employee Data from Germany," Working Papers 1111, Princeton University, Department of Economics, Industrial Relations Section..
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  11. 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.
  12. Devereux, Michael P. & Griffith, Rachel & Simpson, Helen, 2007. "Firm location decisions, regional grants and agglomeration externalities," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 413-435, April.
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  15. 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.
  16. Alan Manning, 2001. "A Generalised Model of Monopsony," CEP Discussion Papers dp0499, Centre for Economic Performance, LSE.
  17. Ashenfelter, Orley & Farber, Henry & Ransom, Michael R., 2010. "Modern Models of Monopsony in Labor Markets: A Brief Survey," IZA Discussion Papers 4915, Institute for the Study of Labor (IZA).
  18. Ransom, Michael R. & Sims, David P., 2009. "Estimating the Firm's Labor Supply Curve in a "New Monopsony" Framework: School Teachers in Missouri," IZA Discussion Papers 4271, Institute for the Study of Labor (IZA).
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  20. 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.
  21. Chang, Chun & Wang, Yijiang, 1996. "Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 505-19, July.
  22. Daron Acemoglu & Jorn-Steffen Pischke, 1996. "Why Do Firms Train? Theory and Evidence," NBER Working Papers 5605, National Bureau of Economic Research, Inc.
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  24. Michael R. Ransom & Ronald L. Oaxaca, 2008. "New Market Power Models and Sex Differences in Pay," Working Papers 1110, Princeton University, Department of Economics, Industrial Relations Section..
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  26. Margaret Stevens, 1999. "Should Firms be Required to Pay for Vocational Training?," Economics Series Working Papers 1999-W04, University of Oxford, Department of Economics.
  27. 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 257-73, May.
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