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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, Department of Business Administration (IBW) 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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  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.
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  8. Bhaskar, V & To, Ted, 1999. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Economic Journal, Royal Economic Society, vol. 109(455), pages 190-203, April.
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  10. 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.
  11. 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.
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  14. Alan Manning, 2003. "The real thin theory: monopsony in modern labour markets," LSE Research Online Documents on Economics 20050, London School of Economics and Political Science, LSE Library.
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  16. Daron Acemoglu & Jorn-Steffen Pischke, 1998. "The Structure of Wages and Investment in General Training," NBER Working Papers 6357, National Bureau of Economic Research, Inc.
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  26. repec:pri:indrel:dsp01736664510 is not listed on IDEAS
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