American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
Exploiting or Augmenting Labor?
American Economic Review: Insights
(pp. 72–89)
Abstract
We show that existing "production approaches" to markdown estimation do not separately identify factor price markdowns from factor-augmenting productivity levels. We propose a method to overcome this challenge and apply it to study the effects of ownership liberalization in Chinese nonferrous metal industries. We find that private firms have much higher labor-augmenting productivity levels than state-owned enterprises (SOEs). However, we also find that private firms exert higher monopsony power over their workers than SOEs, although this only holds for domestically owned firms. This suggests that privatization policies imply a trade-off between increased productivity and monopsony power.Citation
Rubens, Michael, Yingjie Wu, and Mingzhi (Jimmy) Xu. 2026. "Exploiting or Augmenting Labor?" American Economic Review: Insights 8 (1): 72–89. DOI: 10.1257/aeri.20240570Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- F23 Multinational Firms; International Business
- J42 Monopsony; Segmented Labor Markets
- L33 Comparison of Public and Private Enterprises and Nonprofit Institutions; Privatization; Contracting Out
- L61 Metals and Metal Products; Cement; Glass; Ceramics
- L72 Mining, Extraction, and Refining: Other Nonrenewable Resources
- P31 Socialist Enterprises and Their Transitions