Infrastructure Investment and Labor Monopsony Power

Wyatt Brooks (), Joseph Kaboski, Illenin Kondo, Yao Li and Wei Qian

No 28977, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we study whether or not transportation infrastructure disrupts local monopsony power in labor markets using an expansion of the national highway system in India. Using panel data on manufacturing firms, we find that monopsony power in labor markets is reduced among firms near newly constructed highways relative to firms that remain far from highways. We estimate that the highways reduce labor markdowns significantly. We use changes in the composition of inputs to identify these effects separately from the reduction of output markups that occurs simultaneously. The impacts of highway construction are therefore pro-competitive in both output and input markets, and act to increase the share of income that labor receives by 1.8--2.3 percentage points.

JEL-codes: J0 J42 O1 O18 (search for similar items in EconPapers)
Date: 2021-07
New Economics Papers: this item is included in nep-com, nep-lma, nep-reg, nep-tre and nep-ure
Note: DEV EFG LS
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Citations: View citations in EconPapers (9)

Published as Wyatt J. Brooks & Joseph P. Kaboski & Illenin O. Kondo & Yao Amber Li & Wei Qian, 2021. "Infrastructure Investment and Labor Monopsony Power," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(3), pages 470-504, September.

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Journal Article: Infrastructure Investment and Labor Monopsony Power (2021)
Working Paper: Infrastructure Investment and Labor Monopsony Power (2021)
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