Wage Competition with Heterogeneous Workers and Firms

Hamilton, Jonathan; Thisse, Jacques; Zénou, Yves

doi:10.1086/209966

Cited by 52 publications

(51 citation statements)

References 9 publications

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“…As a result of fixed costs of market entry, firms do not exist at all places in geographical space and jobs are therefore differentiated in the eyes of workers by their distance from the worker"s home -a form of product differentiation analysed by Salop (1979). Assuming non-trivial travel-to-work costs, the geographical heterogeneity of jobs and workers then gives the firm market power over workers who live nearby (Bhaskar and To, 1999;Hamilton, Thisse and Zenou 2000;Brueckner, Thisse and Zenou 2002).…”

Section: Pay Setting and Employmentmentioning

confidence: 99%

Monopsony Power, Pay Structure, and Training

Muehlemann¹,

Ryan²,

Wolter³

2013

ILR Review

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Although interest in monopsonistic influences on labour market outcomes has revived in recent years, only a few empirical studies provide direct evidence on it. This paper analyses empirically the effect of monopsony power on pay structure, using a direct measure of labour market 'thinness'. We find that having fewer competitors for skilled labour is associated at the level of the establishment with lower pay for both skilled labour and trainees, but not for unskilled labour. These findings have potentially important implications for the economic theory of training, as most recent models assume that skilled pay is set monopsonistically but both unskilled and trainee pay are determined competitively. Our results support those assumptions for skilled pay and unskilled pay, but not for trainee pay.JEL Classification: J24, J31, J42

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Section: Pay Setting and Employmentmentioning

confidence: 99%

Monopsony Power, Pay Structure, and Training

Muehlemann¹,

Ryan²,

Wolter³

2013

ILR Review

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“…First, there are the models that assume workers have full information and no mobility costs but that jobs are differentiated in some way. Examples of this sort of model are Helsley and Strange (1990); Bhaskar and To (1999); Hamilton, Thisse and Zenou (2000) and Brueckner, Thisse and Zenou (2002). All of these models are based on the model of product differentiation of Salop (1979) in which both workers and employers are located at some point in characteristics space (typically modelled as a circle) but, because of fixed costs of firm creation, employers…”

Section: Introductionmentioning

confidence: 99%

The real thin theory: monopsony in modern labour markets

2003

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Models of 'modern monopsony' based on job differentiation and/or search frictions seem to give employers non-negligible market power over their workers while avoiding the assumption of 'classical monopsony' that employers are large in relation to the size of the labour market that many labour economists find implausible. But, this paper argues that this is somewhat of an illusion because modern theories of monopsony do assume that labour markets are 'thin', although in a more subtle way than the classical models.The paper also argues that there is evidence that labour markets are 'thin' in a way that gives employers some market power over their workers. It presents a model that combines both the job differentiation and search models of modern monopsony and derives predictions about the relationship between wages and commuting. The paper uses UK data to argue that there is good evidence for these predictions: that there is a robust correlation between wages and commuting distance that is the result of worker job search in a thin labour market, that those with longer commutes are not, on average, fully compensated for them and that there is substantial 'wasteful' commuting.

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“…9 Furthermore, if we combine the first four factors of Thünen with his last (7th) agglomeration factor, which concerns the inter-industry linkage or "association", then it now agrees with another basic story of New Economic Geography which explains the localization of particular industries, both internationally and intranationally, based on the availability of intermediate goods and input-output linkages. 10 Moreover, Thünen's fifth factor, which concerns the self-selecting migration process and the impact of the size of the labor market on job-matching among heterogenous workers, has been modeled just recently in New Economic Geography using a game theoretic approach (Helsley andStrange 1990, andHamilton, Thisse andZenou 2000).…”

Section: Thünen and Agglomeration Economiesmentioning

confidence: 99%

Thünen and the New Economic Geography

Fujita

2012

Regional Science and Urban Economics

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Wage Competition with Heterogeneous Workers and Firms

Cited by 52 publications

References 9 publications

Monopsony Power, Pay Structure, and Training

Monopsony Power, Pay Structure, and Training

The real thin theory: monopsony in modern labour markets

Thünen and the New Economic Geography

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