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Title:Holdup in oligopsonistic labour markets: a new role for the minimum wage PDF Logo
Authors:Kaas, Leo
Madden, Paul
Issue Date:2006
Series/Report no.:IZA Discussion Papers 2043
Abstract:We consider a labour market model of oligopsonistic wage competition and show that there is a holdup problem although workers do not have any bargaining power. When a firm invests more, it pays a higher wage in order to attract workers from competitors. Because workers participate in the returns on investment while only firms bear the costs, investment is inefficiently low. A binding minimum wage can achieve the first-best level of investment, both in the short run for a given number of firms and in the long run when the number of firms is endogenous.
Subjects:holdup
investment
minimum wage
JEL:D43
J48
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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