Dixit-Stiglitz Monopsonistic Competition and Minimum Wages

V. Bhaskar and Ted To

We reconsider the employment effect of a minimum wage on employment in a Dixit-Stiglitz model of monopsonistic competition. Unlike Bhaskar and To (1999, Economic Journal), a minimum wage set moderately above the equilibrium wage rate unambiguously reduces employment.

JEL Classifications: J23, J42, L13

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