Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/272342 
Authors: 
Year of Publication: 
2021
Series/Report no.: 
BGPE Discussion Paper No. 214
Publisher: 
Friedrich-Alexander-Universität Erlangen-Nürnberg, Erlangen und Nürnberg
Abstract: 
Economists increasingly refer to monopsony power to reconcile the absence of negativeemployment effects of minimum wages with theory. However, systematic evidence for themonopsony argument is scarce. In this paper, I perform a comprehensive test of monop-sony theory by using labor market concentration as a proxy for monopsony power. Labormarket concentration turns out substantial in Germany. Absent wage floors, a 10 per-cent increase in labor market concentration makes firms reduce wages by 0.5 percentand employment by 1.6 percent, reflecting monopsonistic exploitation. In line with per-fect competition, sectoral minimum wages lead to negative employment effects in slightlyconcentrated labor markets. This effect weakens with increasing concentration and, ulti-mately, becomes positive in highly concentrated or monopsonistic markets. Overall, theresults lend empirical support to the monopsony argument, implying that conventionalminimum wage effects on employment conceal heterogeneity across market forms.
Subjects: 
minimum wage
labor market concentration
monopsony
labor demand
JEL: 
J42
J38
D41
J23
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.