How does market power affect wages? Monopsony and collective action in an institutional context

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1220-Stelzner-Paul-How-Does-Market-Power-Affect-Wages
Authors:

Mark Stelzner, Connecticut College
Mark Paul, New College of Florida


Abstract:

To better understand the theoretical implications of new empirical findings which show that firms have monopsony power, we construct a monopsony-wage-model that integrates strategic interaction between workers and employers in the wage setting process into an institutional context. We show that workers’ collective action and efficient contract bargaining, in this context, reduces rents to firms and increases overall social efficiency. However, such outcomes are contingent on institutional support for workers, and in an environment that does not support workers, inefficient outcomes dominate.

December 20, 2018

AUTHORS:

Mark Stelzner Mark Paul

Topics

Monopsony

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