Oligopsony and the Distribution of Wages

To, Ted; Bhaskar, V.

doi:10.2139/ssrn.278706

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Oligopsony and the Distribution of Wages

European Economic Review, Vol. 47, No. 2, 2003

32 Pages Posted: 16 Aug 2001 Last revised: 21 Nov 2022

See all articles by Ted To

V. Bhaskar

University of Essex

Date Written: May 1, 2001

Abstract

We propose a simple model of wage dispersion arising from oligopsonistic competition in the labor market. Our model has workers who are equally able but who have heterogeneous preferences for non-wage characteristics, while employers have heterogeneous productivity characteristics. We completely and explicitly solve for the equilibrium wage distribution and show that "inside" and "outside" forces interact in wage determination. This interaction generates spillover effects of minimum wages in a manner which is consistent with the empirical evidence.

Keywords: wage differentials, wage dispersion, monopsony, oligopsony, labor theory, minimum wage

JEL Classification: J23, J42, L13

Suggested Citation: Suggested Citation

To, Ted and Bhaskar, V., Oligopsony and the Distribution of Wages (May 1, 2001). European Economic Review, Vol. 47, No. 2, 2003, Available at SSRN: https://ssrn.com/abstract=278706 or http://dx.doi.org/10.2139/ssrn.278706