Catholic Social Science Review

Volume 17, 2012

Guillermo Montes
Pages 161-177

Evaluating the Social Justice Implications of the New Theory of Dynamic Monopsony

This paper describes current theoretical developments in labor economics that are likely to change how we understand the compensation of employees in a wage economy. The new theory of dynamic monopsony theorizes that imperfect labor markets where employees do not get paid their full marginal revenue product are the norm, rather than the exception. Recent empirical work published in a highly ranked, peer-reviewed labor-economics journal provided empirical support for the model. I discuss the implications of these developments in labor economics on the justice of wages within the framework provided by Catholic Social Teaching.