Monopsony Power, Pay Structure, and Training

Posted: 18 Apr 2014

See all articles by Stefan C. Wolter

Stefan C. Wolter

Swiss Coordination Centre for Research in Education (SKBF); University of Bern - Department of Economics

Samuel Muehlemann

University of Bern

Paul Ryan

University of Cambridge - King's College, Cambridge

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2013

Abstract

Although interest in monopsonistic influences on labor market outcomes has revived in recent years, only a few empirical studies provide direct evidence on this topic. In this article, the authors analyze the effect of monopsony power on pay structure, using a direct measure of labor market thinness. The authors find evidence of monopsony power, as firms facing fewer local competitors offer lower wages to skilled labor and trainees, but not to unskilled labor. The findings have important implications for the economic theory of training, as most recent models assume monopsonistic pay-setting for skilled labor, but not for trainees.

Keywords: wage differentials, firm-sponsored training

JEL Classification: J31, J24, J42

Suggested Citation

Wolter, Stefan C. and Mühlemann, Samuel and Ryan, Paul, Monopsony Power, Pay Structure, and Training (October 1, 2013). Industrial and Labor Relations Review, Vol. 66, No. 5, 2013, Available at SSRN: https://ssrn.com/abstract=2368911

Stefan C. Wolter

Swiss Coordination Centre for Research in Education (SKBF) ( email )

CH - 5000 Aarau
Switzerland
+41 62 835 23 90 (Phone)
+41 62 835 23 99 (Fax)

HOME PAGE: http://www.skbf-csre.ch

University of Bern - Department of Economics ( email )

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Bern, CH-3012
Switzerland
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Samuel Mühlemann (Contact Author)

University of Bern ( email )

Gesellschaftstrasse 49
Bern, CH-3012
Switzerland

Paul Ryan

University of Cambridge - King's College, Cambridge ( email )

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