Infrastructure Investment and Labor Monopsony Power

Wyatt J. Brooks, Joseph P. Kaboski, Illenin O. Kondo, Yao Amber Li, Wei Qian

Research output: Contribution to journalArticlepeer-review

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 in 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.

Original languageEnglish (US)
Pages (from-to)470-504
Number of pages35
JournalIMF Economic Review
Volume69
Issue number3
DOIs
StatePublished - Sep 2021
Externally publishedYes

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics, Econometrics and Finance(all)

Fingerprint

Dive into the research topics of 'Infrastructure Investment and Labor Monopsony Power'. Together they form a unique fingerprint.

Cite this