Optimal Taxation and Monopsonistic Labor Market: Does Monopsony justify the Minimum Wage?

Pierre Cahuc and Guy Laroque
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Pierre Cahuc: Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, IZA - Institute for the Study of Labor, Center for Economic Research - CEPR

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Abstract: Does monopsony on the labor market in itself justify the implementation of a minimum wage when it would not be used in a competitive economy? This issue is studied in a model of optimal taxation. We adopt a definition most favorable to the minimum wage: the minimum wage is useful whenever it can replace a non negligible part of the tax schedule. The minimum wage is useful to correct the inefficiencies associated with the monopsony when there is a single skill. But the minimum wage is not useful any more when there are a continuum of skills.

Keywords: Minimum wage; Optimal taxation; Monopsony. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab and nep-ltv
Date: 2009-06-17
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00396252/en/
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Related works:
Working Paper: Optimal Taxation and Monopsonistic Labour Market: Does Monopsony Justify the Minimum Wage? (2007)
Working Paper: Optimal Taxation and Monopsonistic Labor Market: Does Monopsony Justify the Minimum Wage? (2007)
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