Exploiting or Augmenting Labor?

Michael Rubens, Yingjie Wu and Mingzhi (Jimmy) Xu

American Economic Review: Insights, 2026, vol. 8, issue 1, 72-89

Abstract: We show that existing "production approaches" to markdown estimation do not separately identify factor price markdowns from factor-augmenting productivity levels. We propose a method to overcome this challenge and apply it to study the effects of ownership liberalization in Chinese nonferrous metal industries. We find that private firms have much higher labor-augmenting productivity levels than state-owned enterprises (SOEs). However, we also find that private firms exert higher monopsony power over their workers than SOEs, although this only holds for domestically owned firms. This suggests that privatization policies imply a trade-off between increased productivity and monopsony power.

JEL-codes: D24 F23 J42 L33 L61 L72 P31 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/aeri.20240570

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