Monopsony power, pay structure and training

Industrial and Labor Relations Review (Impact Factor: 1). 10/2013; 66(5).

ABSTRACT 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.

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    ABSTRACT: We evaluate the effect of the Apprenticeship Bonus, an employment subsidy programme, on early dropout of apprenticeship. Eligibility to the programme is restricted to school leavers who have actively searched for apprenticeship training to start immediately after leaving school, but were unsuccessful in finding a position. Our analysis is based on rich survey data that has been collected specifically for this study. Using this data, we describe the characteristics of school leavers who have searched for apprenticeship positions unsuccessfully directly leaving school and analyse the effect of the subsidy on the risk of apprenticeship dropout. Even though the subsidy provides strong incentives to prevent dropout, we do not find significant effects of the programme. Our finding suggests that financial incentives are not effective in increasing the probability to finish vocational in-firm training successfully.
    Journal of Vocational Education and Training 08/2013; 66(4):13-53.
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    ABSTRACT: In this paper we calculate the price level and the income's distribution when a firm has two types of market power: Monopsonistic competition in the labor market and Monopolistic competition in the good market. Following the model of Thisse and Toulemonde (2010), we try to develop a tractable NEG’s model with both of these imperfections. Our key finding is that monopsony attracts firms but this could lead to an increase of intern and/or extern inequalities with intermediate trade cost.

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May 23, 2014