Do firms’ wage-setting powers increase during recessions?

Todd Sorensen

World of Labour, 2017, No 355, 355

Abstract: Traditional models of the labor market typically assume that wages are set by the market, not the firm. However, over the last 15 years, a growing body of empirical research has provided evidence against this assumption. Recent studies suggest that a monopsonistic model, where individual firms and not the market set wages, may be more appropriate. This model attributes more wage-setting power to firms, particularly during economic downturns, which helps explain why wages decrease during recessions. This holds important implications for policymakers attempting to combat lost worker income during economic downturns.

Keywords: monopsony; wages; business cycles (search for similar items in EconPapers)
JEL-codes: E2 E3 E6 J3 J42 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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