Ruhr Economic Papers
Ruhr Economic Papers #599
Monopsonistic Competition, Low-Wage Labour Markets, and Minimum Wages – An Empirical Analysis
RWI, 12/2015, 29 S./p., 8 Euro, ISBN 978-3-86788-695-6 DOI: 10.4419/86788695download
This paper investigates the degree of monopsony power of employers in different industries against the background of a statutory minimum wage introduction in Germany in January 2015. A semi-structural estimation approach is employed based on a dynamic model of monopsonistic competition. The empirical analysis relies on a linked employer-employee data set which allows to control for heterogeneity both on the worker and on the firm side. The results show important differences in monopsonistic competition among low-wage industries: Retailing as well as the hotel and restaurant industry can be described as monopsonistic labour markets, while this is not true for agriculture and mining as well as private and public services. From a policy point of view, the introduction of a uniform minimum wage may therefore lead to different employment reactions in industries with a similar wage structure.
JEL-Classification: J42, J31, J38
Keywords: Monopsony; labour supply; minimum wage; Germany