Comment on 'minimum wages for Ronald McDonald monopsonies: a theory of monopsonistic competition'

Frank Walsh

Open Access publications from School of Economics, University College Dublin

Abstract: Bhaskar and To (1999) develop a model of monopsonistic competition and solve explicitly for equilibrium. While a minimum wage set just above the unconstrained optimum leads firms to increase employment it also causes firm exit as profits fall. In this note I show that the employment and welfare effects of the minimum wage which Bhaskar and To had thought to be ambiguous when firm exit was accounted for are in fact unambiguously positive. The model can be adjusted so that the original ambiguous employment effect results. A decomposition is developed which allows us to calculate the long run employment effect.

Keywords: Monopsony; Minimum wages; Employment (search for similar items in EconPapers)
JEL-codes: J30 J42 (search for similar items in EconPapers)
Pages: 5 pages
Date: 2003-07
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Published in: Economic Journal, 113(489) 2003-07-10

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http://hdl.handle.net/10197/8050 Open Access version, 2003 (application/msword)

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Journal Article: Comment on 'minimum wages for ronald mcdonald monopsonies: a theory of monopsonistic competition' (2003)
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