Monopsony in Labour Markets: The Corporate Law Contribution

Ewa Kruszewska (University of Essex)


Orthodox economics, in general, assumes that labour markets are efficient, diffuse and competitive. However, recent research in the US and Europe has dispelled this myth by suggesting that they are far more concentrated than had previously been understood. In light of this evidence, this paper examines how the design of corporate law and institutions plays a part in facilitating and embedding labour market monopsony. This point is significant as economic theory directs that the payment of monopsonistic wage rates to employees may well overinflate the price that consumers pay for the goods and services that the monopsonistic employer sells into product and services markets. As such, in certain conditions, corporate law reforms that address monopsony in labour markets may have positive knock-on effects on services and product markets, enhancing overall welfare and benefitting society and consumers of the products and services of such employers. This paper will provide a sketch as to the form of such corporate law reforms, focusing in particular on the regulation of takeovers.

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