scholarly journals Minimum Wages in Monopsonistic Labor Markets

2020 ◽  
Author(s):  
Luis Felipe Munguia Corella
Keyword(s):  
Labor Markets ◽  
Minimum Wage ◽  
Minimum Wages ◽  
Perfect Competition ◽  
External Shocks ◽  
Omitted Variables ◽  
Heterogeneous Effects ◽  
Wage Effects ◽  
Teenage Employment ◽  
The U.S

Over the last 30 years, researchers have disputed the mixed evidence of the effect of the minimum wage on teenage employment in the U.S. 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 paper, I estimate the effects of the minimum wage for the U.S. 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 between 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 controlling for possible external shocks to the monopsony and omitted variables.

scholarly journals Minimum wages in monopsonistic labor markets

2020 ◽  
Vol 9 (1) ◽  
Author(s):  
Luis F. Munguía Corella
Keyword(s):  
United States ◽  
Labor Markets ◽  
Minimum Wage ◽  
The United States ◽  
Minimum Wages ◽  
Perfect Competition ◽  
External Shocks ◽  
Omitted Variables ◽  
Heterogeneous Effects ◽  
Teenage Employment

AbstractOver 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.

scholarly journals An empirical exploration of geographic heterogeneities in labor markets informality and minimum wage effects

2021 ◽  
pp. 194-226
Author(s):  
Lucas Ferrero ◽  
Matías Hisgen
Keyword(s):  
Labor Markets ◽  
Minimum Wage ◽  
Educational Levels ◽  
Labor Contract ◽  
Potential Source ◽  
Heterogeneous Effects ◽  
Dual Labor Markets ◽  
Wage Effects ◽  
Sectoral Differences ◽  
The Relationship

Dual labor markets, defined by the existence or not of a formal labor contract, are a widespread feature in developing countries. Part of this duality results from marked asymmetries between relevant groups and categories, given one-size-fits-all regulation. This article proposes an exploration of the relationship between informality and the minimum wage as a potential source of variation for the identification heterogeneous effects between regions in Argentina. The results obtained support the existence of heterogeneities in policy effects between the central and peripheral regions. The distribution of wages and the level of compliance with the associated minimum wage regulations are the main variables of interest; both exhibit differential effects across regions, stronger northern agglomerations. These are robust to various specifications and controls associated with interregional differences (educational levels, size of companies, sectoral differences, among others). Results have important implications given persistent regional backwardness, and heterogeneities in terms of the workings of both markets and related policies.

Book Reviews

2013 ◽  
Vol 51 (2) ◽  
pp. 558-560
Keyword(s):  
Labor Market ◽  
Minimum Wage ◽  
Job Search ◽  
Labor Market Outcomes ◽  
Minimum Wages ◽  
New York University ◽  
Market Outcomes ◽  
Welfare Impacts ◽  
Wage Effects ◽  
The Impact

Etienne Wasmer of Sciences Po and LIEPP reviews, “The Minimum Wage and Labor Market Outcomes” by Christopher J. Flinn. The Econlit abstract of this book begins: “Presents a model based on search and bargaining to use in investigating the impact of a minimum wage on labor market outcomes. Discusses descriptive evidence on minimum wage effects; a model of minimum wage effects on labor market careers; labor market and welfare impacts of minimum wages; minimum wage effects on labor market outcomes—a selective survey; assessing the welfare impacts of actual changes in the minimum wage; econometric issues; model estimates and tests; optimal minimum wages; the on-the-job search; and heterogeneity. Flinn is Professor of Economics at New York University and Senior Research Fellow at Collegio Carlo Alberto.”

scholarly journals The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment

2016 ◽  
Vol 8 (1) ◽  
pp. 58-99 ◽  
Author(s):  
David H. Autor ◽  
Alan Manning ◽  
Christopher L. Smith
Keyword(s):  
Minimum Wage ◽  
Wage Inequality ◽  
Wage Structure ◽  
Earnings Inequality ◽  
Minimum Wages ◽  
Wage Distribution ◽  
Prior Work ◽  
Lower Tail ◽  
Structure Changes ◽  
Wage Effects

We reassess the effect of minimum wages on US earnings inequality using additional decades of data and an IV strategy that addresses potential biases in prior work. We find that the minimum wage reduces inequality in the lower tail of the wage distribution, though by substantially less than previous estimates, suggesting that rising lower tail inequality after 1980 primarily reflects underlying wage structure changes rather than an unmasking of latent inequality. These wage effects extend to percentiles where the minimum is nominally nonbinding, implying spillovers. We are unable to reject that these spillovers are due to reporting artifacts, however. (JEL J22, J31, J38, K31)

Minimum Wages, Equity and Unemployment

1996 ◽  
Vol 7 (2) ◽  
pp. 198-212 ◽  
Author(s):  
J.W. Nevile
Keyword(s):  
Social Security ◽  
Minimum Wage ◽  
Low Income ◽  
Empirical Studies ◽  
Equilibrium Analysis ◽  
Perfect Competition ◽  
Wage Rates ◽  
Income Inequalities ◽  
Teenage Employment ◽  
Low Income Families

Increasing income inequalities in Australia increase the need to protect the incomes of low income families. It is difficult for the taxation and social security system alone to do this. Minimum wage rates have a role to play. Thus, the question of their effects on employment can not be sidestepped Traditional analysis of this question is flawed by the assumption of perfect competition and the use of particular equilibrium analysis. Labour markets have many features which distinguish them from perfectly competitive markets and feedbacks from other markets can not be ignored. Theory alone can not settle this question. A large number of empirical studies are surveyed. A widespread consensus exists that effects of minimum wage rises on adult employment are virtually non-existent A number of studies find effects on teenage employment. A number of others do not. However, even those who find statistically significant effects agree that they are small.

Book Reviews

2011 ◽  
Vol 49 (3) ◽  
pp. 758-760
Keyword(s):  
Minimum Wage ◽  
The United States ◽  
Economic Effects ◽  
Minimum Wages ◽  
Wage Effects ◽  
History Of ◽  
University Of Massachusetts ◽  
The University ◽  
Associate Director

Arindrajit Dube of University of Massachusetts Amherst reviews “Minimum Wages” by David Neumark and William L. Wascher. The EconLit Abstract of the reviewed work begins “Presents an overview of the evidence on the economic effects of minimum wages. Discusses the history of the minimum wage in the United States; the effects of minimum wages on employment; minimum wage effects on the distribution of wages and earnings; the effects of minimum wages on the distribution of incomes; the effects of minimum wages on skills; the effects of minimum wages on prices and profits; and the political economy of minimum wages. Neumark is Professor of Economics at the University of California, Irvine. Wascher is Associate Director in the Division of Research and Statistics at the Federal Reserve Board. Index.”

Reply to “Credible Research Designs for Minimum Wage Studies”

ILR Review ◽  
2017 ◽  
Vol 70 (3) ◽  
pp. 593-609 ◽  
Author(s):  
David Neumark ◽  
William Wascher
Keyword(s):  
Panel Data ◽  
Labor Markets ◽  
Minimum Wage ◽  
State Level ◽  
Minimum Wages ◽  
Negative Effects ◽  
Employment Effects ◽  
Research Designs ◽  
Wage Employment

The authors make three points in this reply to the article by Allegretto, Dube, Reich, and Zipperer (ADRZ 2017). First, ADRZ shed no new light on the sensitivity of estimated minimum wage employment effects to the treatment of trends in state-level panel data, and they make some arguments in this context that are misleading or simply wrong. Second, the key issue ADRZ emphasize—using “close controls” to account for shocks that are correlated with minimum wage changes—does not generate large differences in findings, and ADRZ do not address evidence from Neumark, Salas, and Wascher (NSW 2014a) that questions the validity of the close controls used in Allegretto, Dube, and Reich’s (ADR 2011) and Dube, Lester, and Reich’s (DLR 2010) work. Third, ADRZ ignore or dismiss a growing number of studies that address in various ways the same issue of potential correlations between minimum wages and shocks to low-skill labor markets that ADRZ argue generate spurious evidence of disemployment effects, yet often find rather large negative effects of minimum wages on low-skilled employment.

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