Employment effect of wage discrimination in the Weber-Moses triangle

Abstract.

This paper examines the employment effect of wage discrimination in the well-known Weber-Moses triangular model. Assume that the plant location is a choice variable. It shows that the wage discrimination will change total employment of a monopsony if the supply labor curves in two separate markets are linear. It also shows that the wage discrimination may decrease total employment if the more elastic labor supply curve is convex and the less elastic labor supply curve is concave. These results are significantly different from the traditional results in the non-spatial economy. It indicates that the location decision of a firm has an important impact on the employment effect of wage discrimination.