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Monopsony Power, Pay Structure and Training

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  • Mühlemann, Samuel

    (University of Munich)

  • Ryan, Paul

    (King's College Cambridge)

  • Wolter, Stefan C.

    (University of Bern)

Abstract

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 'thinness'. 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 monopsonistically 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.

Suggested Citation

  • Mühlemann, Samuel & Ryan, Paul & Wolter, Stefan C., 2011. "Monopsony Power, Pay Structure and Training," IZA Discussion Papers 5587, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp5587
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    Cited by:

    1. Moretti, Luca & Mayerl, Martin & Mühlemann, Samuel & Schlögl, Peter & Wolter, Stefan C., 2017. "So Similar and Yet So Different: A Comparative Analysis of a Firm's Cost and Benefits of Apprenticeship Training in Austria and Switzerland," IZA Discussion Papers 11081, Institute of Labor Economics (IZA).
    2. Anika Jansen & Mirjam Strupler Leiser & Felix Wenzelmann & Stefan C. Wolter, 2012. "The effect of labor market regulations on training behavior and quality: the German labor market reform as a natural experiment," Economics of Education Working Paper Series 0083, University of Zurich, Department of Business Administration (IBW).
    3. Hinz, Tina & Mohrenweiser, Jens, 2017. "The Effect of Regional Competition and Company-sponsored Training on the Productivity-Wage Wedge," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168292, Verein für Socialpolitik / German Economic Association.
    4. Wei-Bin Zhang, 2020. "Monopsony and Discrimination in Labor Market in the Solow-Stiglitz Two-Group Neoclassical Growth Model," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 6(1), pages 1-19, June.
    5. Uschi Backes-Gellner & Patrick Lehnert, 2022. "Apprenticeships," Economics of Education Working Paper Series 0194, University of Zurich, Department of Business Administration (IBW).
    6. Fries, Jan & Göbel, Christian & Maier, Michael F., 2013. "Do employment subsidies reduce early apprenticeship dropout?," ZEW Discussion Papers 13-053, ZEW - Leibniz Centre for European Economic Research.
    7. Muehlemann, Samuel & Dietrich, Hans & Pfann, Gerard & Pfeifer, Harald, 2022. "Supply Shocks in the Market for Apprenticeship Training," Economics of Education Review, Elsevier, vol. 86(C).
    8. Stockinger, Bastian & Zwick, Thomas, 2016. "Apprentice Poaching in Regional Labor Markets," VfS Annual Conference 2016 (Augsburg): Demographic Change 145565, Verein für Socialpolitik / German Economic Association.
    9. Paul Ryan & Uschi Backes-Gellner & Silvia Teuber & Karin Wagner, 2012. "Apprentice pay in Britain, Germany and Switzerland: institutions, market forces, market power," Economics of Education Working Paper Series 0075, University of Zurich, Department of Business Administration (IBW).
    10. Fanfani, Bernardo, 2022. "Tastes for discrimination in monopsonistic labour markets," Labour Economics, Elsevier, vol. 75(C).
    11. Evan Starr, 2019. "Consider This: Training, Wages, and the Enforceability of Covenants Not to Compete," ILR Review, Cornell University, ILR School, vol. 72(4), pages 783-817, August.
    12. Fabio Méndez & Facundo Sepúlveda, 2019. "Monopsony Power in Occupational Labor Markets," Journal of Labor Research, Springer, vol. 40(4), pages 387-411, December.
    13. Kevin Rinz, 2018. "Labor Market Concentration, Earnings Inequality, and Earnings Mobility," CARRA Working Papers 2018-10, Center for Economic Studies, U.S. Census Bureau.
    14. Paul Ryan, 2011. "Apprenticeship: between theory and practice, school and workplace," Economics of Education Working Paper Series 0064, University of Zurich, Department of Business Administration (IBW), revised Oct 2011.
    15. Bernhard H. Wittek & Samuel Muehlemann, 2021. "The consequences of EU eastern enlargement on human capital accumulation and wages in Germany," Economics of Education Working Paper Series 0184, University of Zurich, Department of Business Administration (IBW).
    16. Luca Moretti & Martin Mayerl & Samuel Muehlemann & Peter Schloegl & Stefan C. Wolter, 2017. "So similar and yet so different: A comparative analysis of a firm's net costs and post-apprenticeship training benefits in Austria and Switzerland," Economics of Education Working Paper Series 0137, University of Zurich, Department of Business Administration (IBW), revised Apr 2018.
    17. Pfister, Curdin & Koomen, Miriam & Harhoff, Dietmar & Backes-Gellner, Uschi, 2021. "Regional innovation effects of applied research institutions," Research Policy, Elsevier, vol. 50(4).
    18. By Barbara Mueller & Jürg Schweri, 2015. "How specific is apprenticeship training? Evidence from inter-firm and occupational mobility after graduation," Oxford Economic Papers, Oxford University Press, vol. 67(4), pages 1057-1077.
    19. Samuel Muehlemann & Stefan Wolter, 2014. "Return on investment of apprenticeship systems for enterprises: Evidence from cost-benefit analyses," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-22, December.
    20. Juho Jokinen, 2020. "The wage curve and local monopsony power," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 64(1), pages 159-183, February.
    21. Balestra, Simone, 2018. "Gun prevalence and suicide," Journal of Health Economics, Elsevier, vol. 61(C), pages 163-177.

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    More about this item

    Keywords

    firm-sponsored training; wage differentials; monopsony;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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