CIRJE-F-42. Bhaskar, Venkataraman and Ted To, "Oligopsony and the Distribution of Wages", March 1999.

We present a simple model which is consistent with the evidence on wage dispersion, including persistent inter- and intra-industry wage differentials, and the effects of minimum wages on this distribution. Our model assumes that workers are equally able but have heterogeneous preferences for non-wage characteristics, while employers have heterogeneous productivity characteristics. This results in a model of labor market oligopsony where "inside" and "outside" forces interact in wage determination, with results which are consistent with the empirical evidence.