The old and new theories of monopsony have clashing predictions

Robinson’s (1933) theory of monopsony, of employer market power, is about fewness in the number of employers allow them to pay below-market wages. This means a minimum wage will raise wages, employment and, importantly, output. Her’s is a joint hypothesis. Employers will hire more workers and will produce more which means the firm must cut its prices to sell this additional output.

The new theories of monopsony such as in Manning’s Monopsony in Motion: Imperfect Competition in the Labour Market have ambiguous predictions about output and employment because they arise out of how the surplus from job matching is split. They acknowledge the possibility that some firms will close because they cannot afford the higher minimum wage rate.

The old monopoly monopsony theories are vindicated if output rises and prices fall as they must to sell the additional output. The new monopsony theories are vindicated if some firms close but employment does not fall much.

Because the new monopsony theories arise from a specific hypothesis about the labour market that it more difficult for larger employers to recruit, Kuhn (2005) argued that the title “Search Models with Ex-Ante Posted Wages in Motion, while considerably more accurate than Monopsony on Motion, is less catchy”.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

The Logical Place

Tim Harding's writings on rationality, informal logic and skepticism

Karl du Fresne

Celebrating humanity's flourishing through the spread of capitalism and the rule of law

Roger Pielke Jr.

professor, author, speaker

Great Books Guy

Reading The Classics

The Market Monetarist

Markets Matter, Money Matters...

Plugging the Gap

Celebrating humanity's flourishing through the spread of capitalism and the rule of law

Velvet Glove, Iron Fist

Celebrating humanity's flourishing through the spread of capitalism and the rule of law

Economics in the Rear-View Mirror

Archival Artifacts from the History of Economics

@STILLTish. Gender Abolition

Examining Gender Identity ideology and its impact on Women's Sex based protections. Exploring how this has taken such firm root in Western societies (Cognitive & Regulatory Capture).

200-Proof Liberals

Celebrating humanity's flourishing through the spread of capitalism and the rule of law

What Paul Gregory is Writing About

Celebrating humanity's flourishing through the spread of capitalism and the rule of law

Kids Prefer Cheese

Celebrating humanity's flourishing through the spread of capitalism and the rule of law

Offsetting Behaviour

Celebrating humanity's flourishing through the spread of capitalism and the rule of law

JONATHAN TURLEY

Res ipsa loquitur - The thing itself speaks

single sex spaces

Single sex spaces are a question of consent

Adventures of a Tudor Nerd

Tudor History from the Wars of the Roses to the Death of Elizabeth I

Weapons and Warfare

History and Hardware of Warfare

CONVERSABLE ECONOMIST

Celebrating humanity's flourishing through the spread of capitalism and the rule of law

Barrie Saunders

Thoughts on public policy and the media

The Victorian Commons

Researching the House of Commons, 1832-1868

Coyote Blog

Celebrating humanity's flourishing through the spread of capitalism and the rule of law

The History of Parliament

Blogging on parliament, politics and people, from the History of Parliament

Catallaxy Files

Australia's leading libertarian and centre-right blog

Books & Boots

reflections on books and art

Legal History Miscellany

Posts on the History of Law, Crime, and Justice

Sex, Drugs and Economics

Celebrating humanity's flourishing through the spread of capitalism and the rule of law

Vincent Geloso

Economics, History, Lots of Data and French Stuff

Climatism

Tracking Anthropogenic Climate Alarmism

Science Matters

Reading between the lines, and underneath the hype.

Point of Order

Politics and the economy

FREEcology

Libertarian environmentalism

Doc's Books

A window into Doc Freiberger's library

Newmark's Door

Celebrating humanity's flourishing through the spread of capitalism and the rule of law

Media Myth Alert

Calling out media myths

Uneasy Money

Commentary on monetary policy in the spirit of R. G. Hawtrey

European Royal History

Exploring the History of European Royalty

Tallbloke's Talkshop

Cutting edge science you can dice with

Marginal REVOLUTION

Small Steps Toward A Much Better World

%d bloggers like this: