Monopsony Power, Pay Structure, and Training. (October 2013)

• Record Type: Journal Article
• Authors: Muehlemann, Samuel; Ryan, Paul; Wolter, Stefan C.
• Is Part Of: Industrial and labor relations review. Volume 66:Number 5(2013)
• Page Start: 1097
• Page End: 1114
• Publication Date: 2013-10
• Subjects: Industrial relations -- Periodicals; 331.05
• DOI: 10.1177/001979391306600504
• Languages: English
• ISSNs: 0019-7939

Abstract

Although interest in monopsonistic influences on labor market outcomes has revived in recent years, only a few empirical studies provide direct evidence on this topic. In this article, the authors analyze the effect of monopsony power on pay structure, using a direct measure of labor market thinness. The authors find evidence of monopsony power, as firms facing fewer local competitors offer lower wages to skilled labor and trainees, but not to unskilled labor. The findings have important implications for the economic theory of training, as most recent models assume monopsonistic pay-setting for skilled labor, but not for trainees.