Monopsony and Discrimination Against Women in the Labour Market in an Extended Solowian Model

Abstract

The purpose of this paper is to study interdependence between economic growth and market
structure involving the gender division of labour. It makes a unique contribution to
modelling economic mechanisms of economic growth involving gender discrimination
against woman due to monopsony in the labour market. The labour market for men and
capital goods markets are perfectly competitive. The labour market for women is
characterised by monopsony. The profits of firms are endogenously determined and equally
distributed among households. I build a model, find a computational procedure to plot the
movement of the economy, and conduct a comparative static analysis in some parameters. I
also compare the economic performance of the model under perfect competition and
monopsony. I conclude that monopsony in the labour market for women lowers national
output, national wealth, and utility levels for families in comparison to perfect competition.
JEL classification code: O41, J42, L13
Keywords: monopsony, gender discrimination, economic growth, endogenous labour supply, Solow
model