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Monopsony in Motion: imperfect competition in labor markets

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Alan Manning|
Princeton University Press (March 2005: paper back issue)

What happens if an employer cuts wages by one cent? Much of labour economics is built on the assumption that all the workers will quit immediately. Here, Alan Manning mounts a systematic challenge to the standard model of perfect competition. 

Monopsony in Motion stands apart by analysing labour markets from the real-world perspective that employers have significant market (or monopsony) power over their workers. Arguing that this power derives from frictions in the labour market that make it time-consuming and costly for workers to change jobs, Manning re-examines much of labour economics based on this alternative and equally plausible assumption.

The book addresses the theoretical implications of monopsony and presents a wealth of empirical evidence. Our understanding of the distribution of wages, unemployment and human capital can all be improved by recognising that employers have some monopsony power over their workers. Also considered are policy issues including the minimum wage, equal pay legislation, and caps on working hours. In a monpsonic labour market, concludes Manning, the 'free' market can no longer be sustained as an ideal and labour economists need to be more open-minded in their evaluation of labour market policies. 

Monopsony in Motion will represent  for some a new fundamental text in the advanced study of labour economics, and for others, an invaluable alternative perspective that henceforth must be taken into account in any serious consideration of the subject.

Alan Manning is professor of economics and director of the Labour Markets Programme in the Centre for Economic Performance at LSE. 

Review

'Given the breadth and depth of the issues Manning covers - clearly, a staggering amount of work went into this book - even sceptical readers will not be able to dismiss his theory lightly...The book is so well written that even the most complicated material in it is readable. The presentation is also commendably well balanced...[it] deserves a place on our bookshelves alongside the other seminal works in labor economics.' Michael Rizzo, Industrial and Labor Relations Review

Endorsements

'This is a fine book, revealing a breadth of scholarship and vision. It pulls many threads together in labour economics to offer a thought-provoking re-evaluation of how labour economists approach many topics, including market power, wage distributions and wage equations, and the economics of education and training. As such it should appear on the syllabi of graduate labour economics programmes.'
Richard Disney, Nottingham University

'The best way to appreciate the value of this book is to go to its first table. There, the author provides an overview of what textbooks in labour economics have to say about monopsony and imperfect competition - not all that much. In that light, Alan Manning's book fills a real gap in the discipline. The books shows that the monopsony model provides a simple alternative explanation for a number of well-known stylised facts of labour markets.'
Coen N Teulings, general director, Tinbergen Institute, Amsterdam

Ends

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