Employment Differentiation, Minimum Wages and Firm Exit
Documentos CEDE from Universidad de los Andes - CEDE
The economic literature acknowledges that labor markets can often be described by monopsonistic competition. In such a structure, employers have market power and in the long run, zero profits due to the free entry and exit of firms. This article builds a model to analyze the role of minimum wages when employment is differentiated. It shows that first best and second best minimum wages can increase employment and improve efficiency by reducing market power, at the expense of having firm exit, higher concentration among employers, and less employment variety. As such, this article can provide insights on the higher firm exit rates observed among new, small and lower productivity firms.
Keywords: Employment differentiation; residual supply; firm exit; and minimum wage. (search for similar items in EconPapers)
JEL-codes: D21 J21 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-com
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:col:000089:019141
Access Statistics for this paper
More papers in Documentos CEDE from Universidad de los Andes - CEDE
Bibliographic data for series maintained by Universidad De Los Andes-Cede ().