Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/44237
Authors: 
Thisse, Jacques-François
Toulemonde, Eric
Year of Publication: 
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: 
Document Type: 
Working Paper

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