Publication:
Product Market Monopolies and Labor Market Monopsonies

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dc.contributor.authorCali, Massimiliano
dc.contributor.authorPresidente, Giorgio
dc.date.accessioned2023-04-05T19:13:31Z
dc.date.available2023-04-05T19:13:31Z
dc.date.issued2023-04-05
dc.description.abstractThis paper unveils a novel externality of product market regulation in the labor market. It shows theoretically and empirically that higher barriers to entry in product markets translate into higher labor market power, measured by the wage markdown—the ratio between the marginal product of labor and the wage. The literature suggests that this wedge can distort factor allocation, resulting in lower aggregate output and employment, but also in higher inequality through a reduction in the labor share of national output. Using variation in investment restrictions across 346 manufacturing product markets in Indonesia, the analysis finds that wage markdowns increase by 25 percent in product markets that become subject to investment restrictions. The result is rationalized using a simple oligopsony model in which higher entry costs reduce the equilibrium number of firms, thereby limiting employment options for workers and, hence, their labor market power. Instrumental variable estimates support the model’s prediction that lower entry is the main driver of the positive relationship between investment restrictions and wage markdowns.en
dc.identifierhttp://documents.worldbank.org/curated/en/099320303292392319/IDU048d194d80f0ab04aad091360f1cb9d6c3c03
dc.identifier.doi10.1596/1813-9450-10388
dc.identifier.urihttps://openknowledge.worldbank.org/handle/10986/39637
dc.languageEnglish
dc.language.isoen
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Papers; 10388
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttps://creativecommons.org/licenses/by/3.0/igo/
dc.subjectPRODUCT MARKET REGULATIONS
dc.subjectLABOR MARKET POWER
dc.subjectMINIMUM WAGE MARKDOWN
dc.subjectFIRM ENTRY
dc.subjectMINIMUM WAGE REDUCTION
dc.subjectMONOPOLY
dc.subjectMONOPSONY
dc.subjectLABOR MARKET
dc.titleProduct Market Monopolies and Labor Market Monopsoniesen
dc.typeWorking Paper
dspace.entity.typePublication
okr.crossref.titleProduct Market Monopolies and Labor Market Monopsonies
okr.date.disclosure2023-03-29
okr.date.lastmodified2023-03-29T00:00:00Zen
okr.doctypePolicy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/099320303292392319/IDU048d194d80f0ab04aad091360f1cb9d6c3c03
okr.guid099320303292392319
okr.identifier.doi10.1596/1813-9450-10388
okr.identifier.externaldocumentum34030950
okr.identifier.internaldocumentum34030950
okr.identifier.reportWPS10388
okr.import.id333
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/099320303292392319/pdf/IDU048d194d80f0ab04aad091360f1cb9d6c3c03.pdfen
okr.topicLaw and Development::Labor & Employment Law
okr.topicSocial Protections and Labor::Employment and Unemployment
okr.topicInternational Economics and Trade::Competition Policy
okr.topicSocial Protections and Labor::Wages, Compensation & Benefits
okr.topicPrivate Sector Development::Competitiveness and Competition Policy
okr.unitEFI-MNA-Regional Director (EMNDR)
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