City Size, Monopsony, and the Employment Effects of Minimum Wages

Priyaranjan Jha, Jyotsana Kala, David Neumark and Antonio Rodriguez-Lopez

No 33862, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We assess how minimum wage effects on restaurant employment in the U.S. vary with labor market size and monopsony power. Using city-level data, we construct monopsony proxies based on labor flows and concentration. Minimum wages bind less in larger cities, consistent with the urban wage premium, and omitting this relationship overstates how labor market power reduces adverse employment effects of minimum wages. Nonetheless, accounting for city size, lower job market fluidity is linked to weaker negative employment effects, consistent with search models. By contrast, traditional concentration measures do not consistently predict variation in the effects of minimum wages.

JEL-codes: J38 J42 R23 (search for similar items in EconPapers)
Date: 2025-05
New Economics Papers: this item is included in nep-com, nep-inv and nep-lma
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