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Monopsonistic competition, low-wage labour markets, and minimum wages: An empirical analysis

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  • Bachmann, Ronald
  • Frings, Hanna

Abstract

This paper investigates the degree of monopsony power of employers in different industries against the background of a statutory minimum wage introduction in Germany in January 2015. A semi-structural estimation approach is employed based on a dynamic model of monopsonistic competition. The empirical analysis relies on a linked employer-employee data set which allows to control for heterogeneity both on the worker and on the firm side. The results show important differences in monopsonistic competition among low-wage industries: Retailing as well as the hotel and restaurant industry can be described as monopsonistic labour markets, while this is not true for agriculture and mining as well as private and public services. From a policy point of view, the introduction of a uniform minimum wage may therefore lead to different employment reactions in industries with a similar wage structure.

Suggested Citation

  • Bachmann, Ronald & Frings, Hanna, 2015. "Monopsonistic competition, low-wage labour markets, and minimum wages: An empirical analysis," Ruhr Economic Papers 599, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:599
    DOI: 10.4419/86788695
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    as
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    More about this item

    Keywords

    monopsony; labour supply; minimum wage; Germany;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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