No. 1547 - The concentration channel of the minimum wage
This paper analyses the potential effects of introducing a minimum wage in the Italian economy through a general equilibrium model in which firms hold both monopsony power in the labour market, due to job search frictions, and monopoly power in the product market, owing to imperfect substitutability between goods.
Introducing a minimum wage would reduce the number of small, less productive firms while increasing the market share of larger ones. This would be accompanied by growth in average labour productivity and wages, alongside a modest rise in unemployment. The reallocation of market shares towards larger firms would raise average profit margins (a concentration channel). For very high minimum wage values, this would compress both the labour share of GDP and the expansionary effects of the minimum wage.
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20 October 2026
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