Template-Type: ReDIF-Paper 1.0

Author-Name: Martin Popp
Author-X-Name-First: Martin 
Author-X-Name-Last: Popp

Title: Minimum Wages in Concentrated Labor Markets
	
Abstract: Economists increasingly refer to monopsony power to reconcile the absence of negative employment effects of minimum wages with theory. However, systematic evidence for the monopsony argument is scarce. In this paper, I perform a comprehensive test of monopsony theory by using labor market concentration as a proxy for monopsony power. Labor market concentration turns out substantial in Germany. Absent wage floors, a 10 percent increase in labor market concentration makes firms reduce wages by 0.5 percent and employment by 1.6 percent, reflecting monopsonistic exploitation. In line with perfect competition, sectoral minimum wages lead to negative employment eects in slightly concentrated labor markets. This effect weakens with increasing concentration and, ultimately, becomes positive in highly concentrated or monopsonistic markets. Overall, the results lend empirical support to the monopsony argument, implying that conventional minimum wage eects on employment conceal heterogeneity across market forms.

Length: 102 pages
Creation-Date:  2021-12
File-URL: http://www.bgpe.de/texte/DP/214_Popp.pdf
File-Format: Application/pdf
File-Function: First version, 2021
Number: 214
Classification-JEL: J42, J38, D41, J23
Keywords: minimum wage, labor market concentration, monopsony, labor demand
Handle: RePEc:bav:wpaper:214_Popp