The Theory And Monopolistic Competition Minimum Wages

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Undertaking general training in the firm by its employees became a normal practice in a modern world. It is seen as an educational program which helps workers to improve their skills and increase their productiveness. Nevertheless, more companies are ready to pay for such an improvement as they are expecting higher profits and a rise in quality. However, such a practice remains controversial and some experts do not believe in its efficiency. Furthermore, another curious tendency observed in a modern world is a regular increase in minimum wages. Most notable economists defend a classical view which states that rise in a minimum wage will inevitably bring higher unemployment and give less chances to young people to find a job. However, according to oligopolistic theory and monopolistic competition minimum wages will eventually lead to higher employment, rather than the opposite. This view will be carefully discussed and analysed in this paper with empirical evidence.
Oligopsony is described as a market with few buyers, while monopsonistic competition is “an oligopsony with free entry, so that employer profits are driven to zero”. Two great examples of such a market structure are a world market of cocoa, where there are only three major firms, which purchase cocoa bean production (Cargill, Archer Daniels Midland and Callebaut), and a tobacco market in United States, where Altria, Brown & Williamson and Lorillard Tobacco Company are three major companies which purchase around
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