Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20831
Authors: 
Strobl, Eric
Walsh, Frank A.
Year of Publication: 
2003
Series/Report no.: 
IZA Discussion paper series 662
Abstract: 
In monopsony models of the labour market either a minimum wage or an employment subsidy financed by a lump sum tax on profits can achieve the efficient level of employment and output. Incorporating working conditions into a monopsony model where higher wages raise firm labour supply, but less attractive working conditions reduce it, changes these policy implications. Specifically, a minimum wage policy could, in contrast to an employment subsidy, cause working conditions to deteriorate and welfare to fall. Empirical evidence from the Republic of Trinidad and Tobago shows that a minimum wage may indeed cause working conditions to worsen.
Subjects: 
minimum wage
working conditions
monopsony models
JEL: 
J2
J3
Document Type: 
Working Paper

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