Market Structure, Oligopsony Power, and Productivity
American Economic Review
vol. 113,
no. 9, September 2023
(pp. 2382-2410)
Abstract
I examine the effects of oligopsony power on allocative efficiency and income redistribution by studying a size regulation in the Chinese tobacco industry that led to ownership consolidation. I show that separate identification of input price markdowns, goods price markups, and productivity is challenging when a subset of inputs is nonsubstitutable, which often holds for materials, and construct and estimate a model to overcome this challenge. I find that the regulation increased input price markdowns by 37 percent on average. This increase in oligopsony power led to a decline in allocative efficiency and redistributed income away from rural households.Citation
Rubens, Michael. 2023. "Market Structure, Oligopsony Power, and Productivity." American Economic Review, 113 (9): 2382-2410. DOI: 10.1257/aer.20210383Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D31 Personal Income, Wealth, and Their Distributions
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- L13 Oligopoly and Other Imperfect Markets
- L66 Food; Beverages; Cosmetics; Tobacco; Wine and Spirits
- P31 Socialist Enterprises and Their Transitions