IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

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.

in new window

Length: 36 pages
Date of creation: Mar 2011
Date of revision:
Publication status: published
Handle: RePEc:iso:educat:0099
Contact details of provider: Postal:
Plattenstrasse 14, CH-8032 Zürich

Phone: ++41 1 634 29 27
Fax: ++41 1 634 43 48
Web page:

More information through EDIRC

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.:

as in new window
  1. 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.
  2. Hirsch, B.T. & Schumacher, E.J., 1993. "Monopsony Power and Relative Wages in the Labor Market for Nurses," Working Papers 1993_06_03, Department of Economics, Florida State University.
  3. Gilles Duranton & Henry G. Overman, 2005. "Testing for Localization Using Micro-Geographic Data," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1077-1106.
  4. Brueckner, Jan & Thisse, Jacques-François & Zenou, Yves, 2000. "Local Labour Markets, Job Matching and Urban Location," CEPR Discussion Papers 2612, C.E.P.R. Discussion Papers.
  5. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  6. Alan Manning, 2001. "A generalised model of monopsony," LSE Research Online Documents on Economics 20115, London School of Economics and Political Science, LSE Library.
  7. Acemoglu, D. & Pischke, J.S., 1997. "The Structure of Wages and Investment in General Training," Working papers 97-24, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. 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.
  9. LaFountain, Courtney, 2005. "Where do firms locate? Testing competing models of agglomeration," Journal of Urban Economics, Elsevier, vol. 58(2), pages 338-366, September.
  10. 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.
  11. Michael R Ransom & Ronald L. Oaxaca, 2010. "New Market Power Models and Sex Differences in Pay," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 267-289, 04.
  12. 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.
  13. Stevens, Margaret, 1999. "Should Firms be Required to Pay for Vocational Training?," CEPR Discussion Papers 2099, C.E.P.R. Discussion Papers.
  14. Daron Acemoglu & Jorn-Steffen Pischke, 1998. "Beyond Becker: Training in Imperfect Labor Markets," NBER Working Papers 6740, National Bureau of Economic Research, Inc.
  15. Ashenfelter, Orley & Farber, Henry S & 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).
  16. 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.
  17. 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.
  18. Manning, Alan, 2003. "The real thin theory: monopsony in modern labour markets," Labour Economics, Elsevier, vol. 10(2), pages 105-131, April.
  19. 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.
  20. John M. Barron & Mark C. Berger & Dan A. Black, 1999. "Do Workers Pay for On-The-Job Training?," Journal of Human Resources, University of Wisconsin Press, vol. 34(2), pages 235-252.
  21. 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.
  22. Douglas O. Staiger & Joanne Spetz & Ciaran S. Phibbs, 2010. "Is There Monopsony in the Labor Market? Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 211-236, 04.
  23. Michael R Ransom & David P. Sims, 2010. "Estimating the Firm's Labor Supply Curve in a "New Monopsony" Framework: Schoolteachers in Missouri," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 331-355, 04.
  24. 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.
  25. 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.
  26. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-62, October.
  27. Orley C. Ashenfelter & Henry Farber & Michael R. Ransom, 2010. "Modern Models of Monopsony in Labor Markets: A Brief Survey," Working Papers 1223, Princeton University, Department of Economics, Industrial Relations Section..
  28. Edwin Leuven, 2005. "The Economics of Private Sector Training: A Survey of the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 91-111, 02.
  29. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:iso:educat:0099. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Eggenberger)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.