Title: Holdup in oligopsonistic labour markets
Description: "We consider a labour market model of oligopsonistic wage competition and show that there is a holdup problem although workers do not have any bargaining power. When a firm invests more, it pays a higher wage in order to attract workers from competitors. Because workers participate in the returns on investment while only firms bear the costs, investment is inefficiently low. A binding minimum wage can achieve the first--best level of investment, both in the short run for a given number of firms and in the long run when the number of firms is endogenous"--Forschungsinstitut zur Zukunft der Arbeit web site.
Subjects: Minimum wage, Labor market