<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Over the last 30 years, researchers have disputed the mixed evidence of the effect of the minimum wage on teenage employment in the United States. Whenever the minimum wage has positive or no effects on employment, they appeal to monopsony models to explain their results. However, very few of these studies have empirically tested whether their results are due to monopsonistic characteristics in the labor markets. In this article, I estimate the effects of the minimum wage for the United States under concentrated labor markets and low-mobility jobs (two variables that measure monopsony), identify heterogeneous effects among different scenarios derived from the monopsony model, and provide a plausible explanation of the mixed results about the minimum wage effects in the literature. My main findings indicate that minimum wages have an elasticity to teenage employment of −0.418 under perfect competition, which is, as expected, much higher than the usual results in the literature. If the monopsony variable is one standard deviation higher than the baseline, it implies a positive change in elasticity of 0.05. The minimum wage has a positive insignificant effect between 0.04 and 0.29 under full monopsonistic labor markets. The results are consistent among different specifications and in controlling for possible external shocks and omitted variables.</p></abstract>

Over the last 30 years, researchers have disputed the mixed evidence of the effect of the minimum wage on teenage employment in the United States. Whenever the minimum wage has positive or no effects on employment, they appeal to monopsony models to explain their results. However, very few of these studies have empirically tested whether their results are due to monopsonistic characteristics in the labor markets. In this article, I estimate the effects of the minimum wage for the United States under concentrated labor markets and low-mobility jobs (two variables that measure monopsony), identify heterogeneous effects among different scenarios derived from the monopsony model, and provide a plausible explanation of the mixed results about the minimum wage effects in the literature. My main findings indicate that minimum wages have an elasticity to teenage employment of −0.418 under perfect competition, which is, as expected, much higher than the usual results in the literature. If the monopsony variable is one standard deviation higher than the baseline, it implies a positive change in elasticity of 0.05. The minimum wage has a positive insignificant effect between 0.04 and 0.29 under full monopsonistic labor markets. The results are consistent among different specifications and in controlling for possible external shocks and omitted variables.

Minimum wages in monopsonistic labor markets

IZA Journal of Labor Economics

This work is licensed under the Creative Commons Attribution 4.0 International License.

{"article-title":"Minimum wages in monopsonistic labor markets"}

Over the last 30 years, researchers have disputed the mixed evidence of the effect of the minimum wage on teenage employment in the United States. Whenever the...

Minimum wages in monopsonistic labor markets

Published Online: Nov 12, 2020

Page range: -

DOI: https://doi.org/10.2478/izajole-2020-0007

Keywords
minimum wage, monopsony, labor policy, oligopsony

© 2020 Luis F. Munguía Corella, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Minimum wages in monopsonistic labor markets

Published Online: Nov 12, 2020

Page range: -

DOI: https://doi.org/10.2478/izajole-2020-0007

Keywordsminimum wage, monopsony, labor policy, oligopsony

© 2020 Luis F. Munguía Corella, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
minimum wage, monopsony, labor policy, oligopsony