Comment on 'minimum wages for Ronald McDonald monopsonies: a theory of monopsonistic competition'

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Title: Comment on 'minimum wages for Ronald McDonald monopsonies: a theory of monopsonistic competition'
Authors: Walsh, Frank
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Date: 10-Jul-2003
Abstract: Bhaskar and To (1999) develop a model of monopsonistic competition and solve explicitly for equilibrium. While a minimum wage set just above the unconstrained optimum leads firms to increase employment it also causes firm exit as profits fall. In this note I show that the employment and welfare effects of the minimum wage which Bhaskar and To had thought to be ambiguous when firm exit was accounted for are in fact unambiguously positive. The model can be adjusted so that the original ambiguous employment effect results. A decomposition is developed which allows us to calculate the long run employment effect.
Type of material: Journal Article
Publisher: Wiley
Copyright (published version): 2003 Royal Economic Society
Keywords: Monopsony;Minimum wages;Employment
DOI: 10.1111/1468-0297.t01-1-00148
Language: en
Status of Item: Peer reviewed
Appears in Collections:Economics Research Collection

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