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A Note On Monopsony Power, Optimal Minimum Wages, and Policy Realism

Sunday, November 13, 2016 20:17
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(Don Boudreaux)


As regular readers of this blog know, the only theoretically plausible economic case for a minimum wage requires the existence of monopsony power in labor markets.  But as regular readers also know, (1) empirically such monopsony in U.S. labor markets is extremely implausible (even when monopsony is reckoned in its ‘new’ and ‘dynamic’ fashion); and (2) such monopsony power is only a necessary, and not a sufficient, condition for minimum wages to ‘work‘.

(This post is wonky, so the remainder of it is below the fold.)



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