Richard Lester's Institutional-Industrial Relations Model of Labor Markets and the Near-Zero Minimum Wage Employment Effect: The Model Card and Krueger Ignored but Shouldn't Have

摘要

David Card and Alan Krueger dedicate their minimum wage book Myth and Measurement (1995) to Richard Lester, an institutional-industrial relations labor economist and key figure in the marginalist controversy of the 1940s. Lester claimed a minimum wage law's employment effect is likely zero or near-zero, the same as Card and Krueger found a half-century later, but they did not follow Lester's theoretical explanation and instead advanced a marginalist dynamic monopsony model. Numerous empirical studies have followed, with substantial evidence pointing to a relatively small and perhaps zero employment effect, but existing theoretical models, such as competitive, search, and monopsony, remain unable to provide a satisfactory explanation. Hence, to advance the minimum wage research program this article synthesizes and formalizes from Lester's writings an alternative institutionalist model of labor markets, represented in a set of five diagrams. The model provides considerable new insight and explanation for a zeroear-zero employment effect, anchored on lack of a well-defined labor demand curve, alternative cost-absorbing managerial actions, and aggregate demand effect.