Market Structure, Oligopsony Power, and Productivity

Michael Rubens

American Economic Review, 2023, vol. 113, issue 9, 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.

JEL-codes: D24 D31 G32 G34 L13 L66 P31 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1257/aer.20210383

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