The Minimum Wage in a Roy Model with Monopsony

Darius Martin

Journal of Labor Research, 2021, vol. 42, issue 3, No 3, 358-381

Abstract: Abstract I propose and estimate a structural model of the labor market that features agents who are heterogeneous in both productivity and reservation wages, and a monopsony employer bound by the minimum wage. I examine the consequences of alternative minimum wage regimes. My results indicate that under a $15 federal minimum wage, at least 1.58 million lower-skilled women aged between 24 and 55 who worked for less than $15 per hour in 2017 would lose their jobs and be involuntarily excluded from labor market participation. The remaining 11.21 million would see their wage rise to the new minimum. The $15 minimum would also encourage an additional 2.74 million women to enter the labor force.

Keywords: Minimum wage; Monopsony; Heterogeneous agents; Roy model (search for similar items in EconPapers)
JEL-codes: J31 J38 J42 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s12122-021-09320-z

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