Endogenous monopsony and the perverse effect of the minimum wage in small firms

Leif Danziger ()

Labour Economics, 2010, vol. 17, issue 1, 224-229

Abstract: The minimum-wage rate has been introduced in many countries as a means of alleviating the poverty of the working poor. This paper shows, however, that an imperfectly enforced minimum-wage rate causes small firms to face an upward-sloping labor supply schedule. Since this turns these firms into endogenous monopsonists, the minimum-wage rate has the perverse effect of reducing employment in small firms as well as what these firms offer their workers. Thus, if there are only small firms, the minimum-wage rate makes all workers that would be employed in the absence of a minimum-wage rate worse off.

Keywords: Endogenous; monopsony; Minimum; wage; Noncompliance; Small; firms (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Endogenous Monopsony and the Perverse Effect of the Minimum Wage in Small Firms (2009)
Working Paper: Endogenous Monopsony and the Perverse Effect of the Minimum Wage in Small Firms (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:17:y:2010:i:1:p:224-229

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