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Title:The distribution of earnings under monopsonistic/polistic competition PDF Logo
Authors:Thisse, Jacques-Fran├žois
Toulemonde, Eric
Issue Date:2010
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5136
Abstract:Recent empirical contributions in labor economics suggest that individual firms face upward sloping labor supplies. We rationalize this by assuming that diosyncratic non-pecuniary conditions interact with money wages in workers' decisions to work for specific firms. Likewise, firms supply differentiated goods in response to differences in consumer tastes. Hence, firms are price-makers and wage-setters. By combining monopolistic and monopsonistic competition, our setting encapsulates general equilibrium interactions between the two markets. The equilibrium involves double exploitation of labor. Compared to the competitive outcome, the high-productive workers are overpaid under free entry, whereas the low-productive workers are underpaid. In the same vein, capital-owners receive a premium, whereas workers are exploited.
Subjects:worker heterogeneity
monopsonistic competition
monopolistic competition
labor exploitation
wage dispersion
JEL:D33
J31
J42
J71
L13
Persistent Identifier of the first edition:urn:nbn:de:101:1-201010133403
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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