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Oligopsony and the Distribution of Wages

  • V. Bhaskar

    (University of Essex)

  • Ted To

    (University of Warwick)

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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Paper provided by EconWPA in its series Labor and Demography with number 9903003.

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Date of creation: 18 Mar 1999
Date of revision:
Handle: RePEc:wpa:wuwpla:9903003
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  12. 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.
  13. Nickell, S. & Wadhwani, S., 1989. "Insider Forces And Wage Determination," Papers 334, London School of Economics - Centre for Labour Economics.
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