Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
972909 | Labour Economics | 2008 | 16 Pages |
Abstract
We consider a labour market model of oligopsonistic wage competition and show that there is a holdup problem although workers do not have any bargaining power. When a firm invests more, it pays a higher wage in order to attract workers from competitors. Because workers participate in the returns on investment while only firms bear the costs, investment is inefficiently low. A binding minimum wage can achieve the first-best level of investment, both in the short run for a given number of firms and in the long run when the number of firms is endogenous.
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Social Sciences and Humanities
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Economics and Econometrics
Authors
Leo Kaas, Paul Madden,