Monopoly, employment and wages

This paper shows that monopoly in the capital equipment market results in higher productivity and wages but lower employment in comparison with the benchmark of competition. The combined effect on workers' welfare is negative, for expected earnings (defined as the product of the probability of employment and the wage earned when employed) are lowered. Indeed, low skill workers suffer relatively greater declines in employment and expected earnings. Furthermore, the employment and expected earnings of all workers, as well as the employment of low skill workers relative to high skill workers, are all decreasing in the relative supply of high skill workers. (C) 2002 Elsevier Science B.V. All rights reserved.