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Market Structure, Oligopsony Power, and Productivity

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  • Michael Rubens
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.

Suggested Citation

  • Michael Rubens, 2023. "Market Structure, Oligopsony Power, and Productivity," American Economic Review, American Economic Association, vol. 113(9), pages 2382-2410, September.
    • Handle: RePEc:aea:aecrev:v:113:y:2023:i:9:p:2382-2410
    DOI: 10.1257/aer.20210383
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    References listed on IDEAS

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    Cited by:

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    2. Jordi Jaumandreu & Rigoberto Lopez, 2024. "Markups in US food manufacturing accounting for non‐neutral productivity," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(2), pages 573-591, June.

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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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