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Minimum Wages and the Card‐Krueger Paradox

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  • A. Ross Shepherd

Abstract

An apparent paradox perceived by Card and Krueger concerning the relationship between minimum wages, employment, and output prices is resolved by revisiting the economics of minimum wages to show that under monopsonistic conditions in the labor market and competitive price‐taking in the market for output, increases in both firm‐level and industry employment are compatible with increases in output prices.

Suggested Citation

  • A. Ross Shepherd, 2000. "Minimum Wages and the Card‐Krueger Paradox," Southern Economic Journal, John Wiley & Sons, vol. 67(2), pages 469-478, October.
    • Handle: RePEc:wly:soecon:v:67:y:2000:i:2:p:469-478
    DOI: 10.1002/j.2325-8012.2000.tb00348.x
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    References listed on IDEAS

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    1. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    2. Shepherd, A Ross, 1971. "Output of the Restrained Firm: Comment," American Economic Review, American Economic Association, vol. 61(1), pages 237-239, March.
    3. William P. Gramm & Robert B. Ekelund Jr., 1968. "Monopsony in a Muddle," The American Economist, Sage Publications, vol. 12(2), pages 79-80, October.
    4. Bhaskar, V & To, Ted, 1999. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Economic Journal, Royal Economic Society, vol. 109(455), pages 190-203, April.
    5. William P. Gramm & Robert B. Ekelund Jr., 1968. "Monopsony, Minimum Wages, and Employment: A Reconsideration," The American Economist, Sage Publications, vol. 12(1), pages 52-54, March.
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