Monopsonistic Exploitation Research Articles

Vertical integration to avoid monopsonistic exploitation

AbstractFor decades, the suppliers of fed cattle have complained about monopsonistic exploitation by the dominant meatpackers. Recently, a group of ranchers and feedlot operators joined forces to build their own meatpacking plant in an effort to avoid such exploitation. In this context, we show that forward vertical integration by the suppliers of fed cattle will increase their profits while increasing output and lowering prices for consumers. In addition, we show that vertical integration improves both consumer welfare and social welfare. We also examine the use of a joint sales agency, which is an economically equivalent alternative to vertical integration.

Alternatives

Fair trade has been presented by its advocates as a progressive rural development strategy. Fair trade is, however, a specific configuration of capitalist relations of exploitation in which exploitation takes two forms: the exploitation of labour and monopsonistic exploitation. Moreover, these processes are strongly gendered. As such, fair trade serves to deepen the character of the capitalist market imperatives subordinating peasant farmers and rural workers.

Labour (im)mobility and monopsonistic exploitation of workers in the urban informal sector: Lessons from a field study

It is well-recognised in labour economics that employers in monopsonistic competition have market power to set wages below the productivity of workers if workers are immobile, which causes monopsonistic exploitation of workers. Monopsonistic exploitation is propelled by employers’ expectations about the degree of (im)mobility of workers and therefore by ex post mobility of workers. It hence begs a question of what determines the relative (im)mobility of informal workers, which has significant implications for monopsonistic exploitation and working poverty in the urban informal sector. From our field study of urban and peri-urban labour markets in Bangladesh, by modifying the method of stochastic frontier analysis, we explain the behavioural foundation to the relative (im)mobility of informal workers. We thereby unravel the effects of individual and household characteristics, sociological, institutional factors and household ties (including worker’s kinship) on the relative immobility of a worker that can, in turn, explain monopsonistic exploitation and working poverty widely prevalent in the urban informal sector of South Asia.

Modern Models of Monopsony in Labor Markets: A Brief Survey

This brief survey contains a review of several new empirical papers that attempt to measure the extent of monopsony in labor markets. As noted originally by Joan Robinson, monopsonistic exploitation represents the gap between the value of a worker's marginal product and the worker's wage, and it represents both a distortion in the allocation of resources and an income transfer away from workers. The evidence surveyed from a fairly broad range of labor markets suggests that monopsony may be far more pervasive than is sometimes suggested.

Theory of the Perfect Game: Competitive Balance in Monopoly Sports Leagues

Based on the limiting assumption that sports owners are profit maximizers the invariance proposition holds that revenue sharing has no impact on competitive balance in sports leagues. If owners are win-maximizing sportsmen instead, then revenue sharing can lead to increased competitive balance and higher payrolls. Evidence of the sportsman effect is provided by erosion of monopsonistic exploitation in the four major American sports leagues where players now share about 60% of revenues. Monopsony power erosion forces sports-league cartels to exploit statutory monopoly power in monster deals for media rights fees and public venue subsidies. New evidence on competitive balance suggests that revenue sharing leads to increased balance with or without team salary caps. Optimum competitive balance is an empirical question, and the answer lies between random competition of the NFL and deterministic dynasties of the NBA.

Monopsonistic exploitation in contract farming: articulating a strategy for grower cooperation

AbstractContract farming has been considered a new hope to instil dynamism in third world agriculture. However, there remains serious concern whether small peasants will be able to benefit from this system since buyers may often be a single large or at most, few large corporations, a typical case of monopsony. In this paper we question the basis of the fears that are often raised in the literature. A clear analytical approach to understanding the (economic) meaning of monopsony helps us articulate a strategy for grower cooperation that could effectively deal with monopsony power in contract farming systems. Copyright © 2007 John Wiley & Sons, Ltd.

USING BASEBALL CARD PRICES TO MEASURE STAR QUALITY AND MONOPSONY

Baseball card prices are used to capture star quality in a new measure of productivity in Major League Baseball. Star quality, which impacts revenues, is determined from a player's baseball card price as the residual in a fit of card prices to performance statistics. This measure is entered into the computation of individual player marginal revenue product and compared to players' salaries using data from the four years leading up to the 1994 MLB strike. Results are examined for monopsonistic exploitation by market size, free agency status, type of player, and other relevant categories. Underpaid and overpaid players are identified.

The Economics of American Sports Leagues

Player mobility in North American sports leagues is limited by labour market constraints designed ostensibly to allow teams to recoup player development costs and to maintain competitive balance within leagues. Theory holds that the distribution of talent will be invariant under any institutional configuration, and that while rules to constrain movement will serve to enhance monopsonistic exploitation of talent, they will have no effect on competitive balance. This paper reprises a general theory through which the effects of the labour market constraints can be comparatively analysed for American sports leagues. The economics of sports has been relegated to the realm of labour theory by the unnecessarily limiting assumption that owners of sports clubs are single‐minded profit maximisers. This paper also presents a theory that seeks to unify capital market decisions of financial leverage and ownership syndication with operational labour market decisions for athletic talent and an owner’s desire to win.

Who pays for minor league training costs?

As an alternative to monopsonistic exploitation, the underpayment of players in major league baseball may be explained as the attempt by owners to recoup general training expenses. In this article, a method is proffered for estimating the ‘surplus’ extracted from those players restricted by the reserve clause, where this surplus is defined as the difference between what the player is actually paid and what he would have received if he were a free agent. These estimates are then used to examine how the surplus varies across players. The results suggest a number of interesting aspects of the recovery of minor league training costs, monopsony exploitation, and the distribution of the surplus across players. First, owners only extract a surplus from ‘apprentices’ (i.e., those young players who are ineligible for salary arbitration). Second, the largest surpluses are extracted from those who cost the least to train. In fact, the surplus generated by star apprentices is about twice that of mediocre apprentices. Finally, the results suggest that the surplus extracted from minority apprentices is 10–15% higher than that extracted from white apprentices.

WHAT'S WRONG WITH SCULLY‐ESTIMATES OF A PLAYER'S MARGINAL REVENUE PRODUCT

Economic InquiryVolume 37, Issue 2 p. 369-381 WHAT'S WRONG WITH SCULLY-ESTIMATES OF A PLAYER'S MARGINAL REVENUE PRODUCT Anthony C. Krautmann, Anthony C. Krautmann Krautmann:Professor, Department of Economics, DePaul University, Chicago, Phone 1–312-362-6176 Fax 1–312-362-5452 E-mail [email protected] *I would like to thank an anonymous referee for comments on an earlier draft, Paul Novak for valuable research assistance, and Sue Schoeben for her editorial advice.Search for more papers by this author Anthony C. Krautmann, Anthony C. Krautmann Krautmann:Professor, Department of Economics, DePaul University, Chicago, Phone 1–312-362-6176 Fax 1–312-362-5452 E-mail [email protected] *I would like to thank an anonymous referee for comments on an earlier draft, Paul Novak for valuable research assistance, and Sue Schoeben for her editorial advice.Search for more papers by this author First published: 02 July 2007 https://doi.org/10.1111/j.1465-7295.1999.tb01435.xCitations: 79 AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Citing Literature Volume37, Issue2April 1999Pages 369-381 RelatedInformation

Bargaining power and the structure of salaries in major league Baseball

AbstractThe relationship between bargaining power and the structure of salaries in major league baseball has been a subject of much empirical study. The evidence provided in this paper suggests that eligibility for final‐offer arbitration does not result in a ‘fixed’ reduction in monopsonistic exploitation. Rather, the level of exploitation diminishes markedly in the first season of eligibility and continues to decrease in subsequent seasons. By the time the player reaches free agency eligibility, he can expect to earn the same single‐season salary that he would as a free agent.

The effects of foreign investment in the presence of a factor market monopsony

This paper introduces a foreign monopsony within the Ricardo—Viner production model to show that the observed behavior of host country interest groups — labor's opposition and domestic capital's support — towards greater foreign investment need not be inconsistent with the proposition that an inflow of foreign capital raises real wages and lowers the return to domestic capital. It is shown that an increase in foreign investment intensifies the degree of ‘monopsonistic exploitation’ of labor and produces greater supranormal profits for the foreign monopsony. Moreover, if these profits are distributed to domestic capitalists according to some fixed proportion, this increase in income may offset the decline in their real return.

Free agents’ impact on the labor market for baseball players

This paper evaluates the 1976 free agent rule’s impact on the labor market for baseball players. Free agency has specific consequences for monopsonistic exploitation and racial discrimination in salary determination. It reduces monopsonistic exploitation for all players and increases salary opportunities for black and Latino players. However, this change in a player’s status vis-a-vis a team has generated salary disparities among players based, not on race, but bargaining position.

Economic Mobility, Monopsonistic Discrimination and Sex Differences in Wages

Economists have often attributed wage differences between men and women to three general causes: differences in personal characteristics such as education or experience; the psychic cost of working with women (taste discrimination), discussed, for example, by Becker [3] and Arrow [1]; and women's relative lack of job choice resulting in a poor bargaining position and monopsonistic exploitation in the labor market, as suggested by Krueger [19] and Madden [24]. This latter form of potential wage discrimination, due to limited job opportunities or immobility in the labor market, however, has received the least attention in the literature. Little empirical evidence exists on whether monopsony actually influences the wages of men and women and on how the several sources of economic immobility, such as occupational segregation, unionization, and geographical factors, affect the degree of monopsonistic exploitation among both sex groups. Our purpose in this paper is to propose and implement a direct test for the effects of monopsonistic wage exploitation on sex differentials in wages to identify the proximate sources of monopsony-in particular, occupational patterns, union activity and geographic mobility. In Section II the existing theoretical and empirical work on monopsony in the labor market is reviewed and an empirically testable functional form is derived from the theory. In Section III the theory is implemented empirically based on micro data from the 1970 Public Use Samples combined with aggregate SMSA data. Supply elasticities characterizing males and never-married females are estimated for each of 95 SMSAs and included in regressions on SMSA-level wage data. The results obtained suggest that women's wages appear to be significantly more affected by monopsony than are men's, especially in areas characterized by high union activity and relatively low rates of female participation in male occupations.

ELASTICITY OF CAPITAL SUPPLY AND SECOND ORDER CONDITIONS: REPLY

WE CAN BE GRATEFUL to Professor Nichols for his taxonomic note, drawing attention to necessity, in optimization-equilibrium analysis, of considering relevant second order or sufficiency conditions. Such a procedure is, of course, a sine qua non of mathematical economic analysis, but it is as well to be reminded of it in any context in which, as in my earlier article, a new perspective on old problem of enterprise optimization is being opened up. Unfortunately, complaints against my article are not perfectly apposite and they stem, as I shall indicate in what follows, from a failure to consider adequately context I had endeavored to spell out carefully. It will be most useful at this time to emphasize three points which establish framework of analysis with which I am concerned, and then to answer directly main point of Professor Nichols' note. First, it is necessary, in our development of micro-financial theory, to recapture implications of what I called Robinson-Hicks tradition in theory of firm. Recognizing pervasive phenomena of imperfect competition and potentially monopsonistic positions, financial analysis of firm should now, as production and pricing theory of firm did previously, drop assumption of market perfection and an orientation that relies on thought-forms of perfect competition, on either side of as providing paradigm of analysis. For this reason I have endeavored to focus attention on the unique confrontation of an individual corporation with supply conditions determining its usage of external capital market, and I submitted a plea for a more careful consideration of this unique confrontation of firm with its imperfectly competitive environment, and particularly possibilities of its monopsonistic exploitation in money-capital market and therefore possibilities of its affecting elasticity of its interest cost function. Second, it should be kept clearly in mind that point of financial theory with which my earlier article was concerned, question of debt-to-equity ratio in capital structure of firm, is not, in last analysis, logically separable from many other questions bearing upon total conditions for corporate optimization. As I pointed out clearly in last two paragraphs of my article, a financial theory of firm is logically viable only when it is shown to be interdependent and consistent with theories of corporate production and real capital (as distinct from money-capital) structure. I indicated at that time also that I shall submit in a forthcoming book some new suggestions for a logically integrated body of micro-optimization theory, in which theories of production, capital, and finance are shown to be mutually relevant and their problem areas and outcomes mutually determinate. (See my The Theory of Firm: Production, Capital, and Finance, McGraw-Hill, New York, forthcoming). For present I simply remark that problem of optimum capital structure is much more complex, in context of a generalized corporate optimization model, than partial optimization argument in my article, taken by itself, might tend to suggest. It was for this reason that in article I deliberately did two things: first, I gave warning in concluding paragraphs about need to work toward higher theoretical level of integrating partial optimization theorem regarding elasticity of capital costs with other determinants of total corporate structure (production