A Comment on: "Walras-Bowley Lecture: Market power and wage inequality" by Shubhdeep Deb, Jan Eeckhout, Aseem Patel, and Lawrence Warren
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) differential degrees of employer power in labor and product markets; (ii) investigating the dynamic sources of markups (e.g., through innovation), and (iii) considering wage bargaining models, not just wage posting models, which have some starkly different implications for wage setting.
1 May 2024
Econometrica 92(3) , pp.643-646, 2024
https://www.econometricsociety.org/publications/econometrica/2024/05/01/A-Comment-on-WalrasBowley-Lecture-Market-Power-and-Wage-Inequality-by-Shubhdeep-Deb-Jan-Eeckhout-Aseem-Patel-and-Lawrence-Warren-p643
This Journal article is published under the centre's Growth programme.