Exploitation of Labor? Classical Monopsony Power and Labor's Share / Wyatt J. Brooks, Joseph P. Kaboski, Yao Amber Li, Wei Qian.

Format:

Book

Author/Creator:

Brooks, Wyatt J.

Contributor:

National Bureau of Economic Research.

Kaboski, Joseph P.

Li, Yao Amber.

Qian, Wei.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25660.

NBER working paper series no. w25660

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

How important is the exercise of classical monopsony power against labor for the level of wages and labor's share? We examine this in the context of China and India - two large, rapidly-growing developing economies. Using theory, we develop a novel screen to quantify how wages are affected by market power exerted in labor markets, either by a single firm or a group of cooperating firms. The theory guides the measurement of labor "markdowns", i.e., the gap between wage and the value of the marginal product of labor, and the screen examines how they comove with local labor market share and the share of cooperating firms. Applying this test, we find that markdowns substantially lower the labor share: by up to 10 percentage points in China and 15 percentage points in India. This impact has fallen over time in both countries as firm concentration in these labor markets has decreased.

Notes:

Print version record

March 2019.