Minimum Wage and Firm Variety

Arbeitspapier

Exploiting minimum-wage variation within multi-state commuting zones, we document a negative relationship between minimum wages and firm variety in the U.S. restaurant and retail-trade industries. To explain this finding, we construct a heterogeneous-firm model with a monopsonistic labor market and endogenous firm variety. The decentralized equilibrium underprovides the mass of firms compared to the outcome achieved by a welfare-maximizing planner. A binding minimum wage further reduces the mass of firms, exacerbating the distortion. Workers value employer variety, and thus, by reducing firm variety the minimum wage reduces workers' welfare even if the average wage increases.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9312

Classification and Topics

• Classification: Wirtschaft ; Wages, Compensation, and Labor Costs: Public Policy ; Monopsony; Segmented Labor Markets
• Subject: minimum wage ; number for firms ; love of employer variety

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jha, Priyaranjan ; Rodríguez López, Antonio
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/245493
• Last update: 10.03.2025, 11:43 AM CET