Dealing With Monopsony Power: the Case for Using Employment Subsidies'

Strobl, Eric; Walsh, Frank

doi:10.2139/ssrn.988648

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Dealing With Monopsony Power: the Case for Using Employment Subsidies'

CORE Discussion Paper No. 2003/87

9 Pages Posted: 25 May 2007

See all articles by Eric Strobl

Eric Strobl

École Polytechnique, Paris - Department of Economic Sciences; IZA Institute of Labor Economics

Frank Walsh

National University of Ireland - University College Dublin

Date Written: October 2003

Abstract

We show in a monopsony model that a minimum wage may raise hours which are already too high but has ambiguous effects on the number of employees and utility. Employment subsidies, in contrast, unambiguously improve worker utility and bring the market equilibrium closer to the efficient outcome.

Keywords: Monopsony Power, Minimum Wages, Employment Subsidies

JEL Classification: J30

Suggested Citation: Suggested Citation

Strobl, Eric and Walsh, Frank, Dealing With Monopsony Power: the Case for Using Employment Subsidies' (October 2003). CORE Discussion Paper No. 2003/87, Available at SSRN: https://ssrn.com/abstract=988648 or http://dx.doi.org/10.2139/ssrn.988648