Bellante on Monopsony
Posted By Don Boudreaux On February 19, 2013 @ 1:01 pm In Competition,Myths and Fallacies,Work | Comments Disabled
A great deal of folly is unleashed by failure to apply even the most useful theories wisely. I likely will write more in coming days on what strikes me as a wholly naive and uncritical transference of a textbook model – that of short-run monopsony power in the market for unskilled workers – to reality. This transference leads not only to faulty analysis but to enthusiastic apologies for a policy, minimum-wage legislation, that is a special tax on employers who hire unskilled workers. Low-paid workers – those whose employment can least afford to bear the burden of a special tax – are victims of this naive blackboard theorizing.
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[1] In the meantime, here’s the labor economist Don Bellante writing clearly, in 2007, on the general misunderstanding and misuse of monopsony-labor-market models: https://docs.google.com/viewer?a=v&q=cache:WFq0Lw74Nh4J:citeseerx.ist.psu.edu/viewdoc/download?doi%3D10.1.1.169.3668%26rep%3Drep1%26type%3Dpdf+monopsony+power+and+minimum+wage+%22morgan+reynolds%22&hl=en&gl=us&pid=bl&srcid=ADGEEShPNLWZvwmCJ8aQvGQhxE1vZtx0ZEGuydj44Vb6F69rvDI9g7IHTpNat8McwYSBL8Z5vfV7WH3LLCdNYOhEe-U2gD_ZPVYlfGI00qhFanebOw1-3ZvSdtRhoGtlROhmia0hAro3&sig=AHIEtbR2IpDInTVVtFZ3faPFRPEW8fWT4g
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