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| Title: | | Holdup in oligopsonistic labour markets: a new role for the minimum wage  |
| 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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