Introduction

Boris Hirsch ()
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Boris Hirsch: Friedrich-Alexander-Universität Erlangen-Nürnberg

Chapter Chapter 1 in Monopsonistic Labour Markets and the Gender Pay Gap, 2010, pp 1-8 from Springer

Abstract: Abstract In his ground-breaking monograph Monopsony in Motion: Imperfect Competition in Labor Markets, Manning (2003a, p. 3) starts his argument in favour of a monopsonistic approach to labour market phenomena with a compelling case against perfect competition: ‘What happens if an employer cuts the wage it pays its workers by one cent? Much of labor economics is built on the assumption that all existing workers immediately leave the firm as that is the implication of the assumption of perfect competition in the labor market.’ Taking the model literally, this would indeed be its prediction. Other than in a perfectly competitive labour market where employers are wage takers unable to deviate from the market wage, a monopsonistic approach assumes that employers possess significant wage-setting power and actually exercise their market power. Put differently, it argues that some of the workers stay with the firm, giving the firm some discretion in wage setting. Technically speaking, the main difference between the two models is that under perfect competition the labour supply faced by the firm is infinitely elastic, whereas this does not hold under monopsony.1

Keywords: Labour Market; Labour Supply; Market Power; Wage Distribution; Imperfect Competition (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-642-10409-1_1

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DOI: 10.1007/978-3-642-10409-1_1

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