A Comment on:“Walras–Bowley Lecture: Market Power and Wage Inequality” by Shubhdeep Deb, Jan Eeckhout, Aseem Patel, and Lawrence Warren
Econometrica · 2024 · Volume 92 · Issue 3
Abstract
A burgeoning literature in labor economics is focused on modeling employer labor market power, generally finding nontrivial estimates of monopsony power. A smaller literature also simultaneously incorporates product market power. Deb, Eeckhout, Patel, and Warren (2024) is an example of applying an oligopoly-oligopsony model to the U.S. labor market, arguing for important effects on wage levels and inequality from rising market power. I support combining IO and labor as a fruitful way of studying wages and business dynamism, but argue for looking more broadly at (i)differentialdegrees of employer power in labor and product markets; (ii) investigating thedynamicsources of markups (e.g., through innovation), and (iii) considering wagebargainingmodels, not just wage posting models, which have some starkly different implications for wage setting.
Keywords
Market structure, monopsony, bargaining, inequality
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