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A comment on: "Walras-Bowley lecture: market power and wage inequality" by Shubhdeep Deb, Jan Eeckhout, Aseem Patel, and Lawrence Warren

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  • Van Reenen, John

Abstract

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.

Suggested Citation

  • Van Reenen, John, 2024. "A comment on: "Walras-Bowley lecture: market power and wage inequality" by Shubhdeep Deb, Jan Eeckhout, Aseem Patel, and Lawrence Warren," LSE Research Online Documents on Economics 122084, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:122084
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    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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