Machin, Stephen, Manning, Alan and Woodland, Stephen (1994) Are workers paid their marginal product? evidence from a low wage labour market. Paper No' CEPDP0158'. London School of Economics and Political Science, London, UK.Full text not available from this repository.
Because of labour market frictions, the supply of labour to a firm does not fall instantaneously to zero if an employer cuts wages. This gives employers some monopsony power. In the absence of trade unions, minimum wages and efficiency wage considerations a profit-maximising employer will set a wage below the marginal revenue product of labour so that workers are, to use the terminology of Hicks and Pigou, exploited. This paper presents a method for computing the rate of exploitation. This method is then applied to a unique data set on workers in residential homes for the elderly on England''s sunshine coast. We conclude that, on average, firms pay workers about 15% less than their marginal product.
|Item Type:||Monograph (Discussion Paper)|
|Additional Information:||© 1994 London School of Economics and Political Science|
|Library of Congress subject classification:||H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
|Sets:||Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
|Identification Number:||Paper No' CEPDP0158'|
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