Infrastructure Investment and Labor Monopsony Power

43 Pages Posted: 14 Jul 2021

See all articles by Wyatt Brooks

Wyatt Brooks

University of Notre Dame

Joseph P. Kaboski

Ohio State University (OSU) - Economics; National Bureau of Economic Research (NBER); University of Notre Dame - Department of Economics

Illenin Kondo

University of Notre Dame

Yao Amber Li

Hong Kong University of Science and Technology - School of Business and Management, Department of Economics; HKUST IEMS (Institute for Emerging Market Studies)

Wei Qian

Shanghai University of Finance and Economics

Date Written: June 1, 2021

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 of 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.

Suggested Citation

Brooks, Wyatt and Kaboski, Joseph P. and Kondo, Illenin and Li, Yao Amber and Qian, Wei, Infrastructure Investment and Labor Monopsony Power (June 1, 2021). CEPR Discussion Paper No. DP16291, Available at SSRN: https://ssrn.com/abstract=3886764

Wyatt Brooks (Contact Author)

University of Notre Dame ( email )

361 Mendoza College of Business
Notre Dame, IN 46556-5646
United States

Joseph P. Kaboski

Ohio State University (OSU) - Economics ( email )

410 Arps Hall
1945 N. High St.
Columbus, OH 43210-1172
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

Illenin Kondo

University of Notre Dame

361 Mendoza College of Business
Notre Dame, IN 46556-5646
United States

Yao Amber Li

Hong Kong University of Science and Technology - School of Business and Management, Department of Economics; HKUST IEMS (Institute for Emerging Market Studies) ( email )

Department of Economics, Hong Kong U of Sci&Tech
Clear Water Bay, Kowloon, Hong Kong SAR, China
Kowloon
Hong Kong

HOME PAGE: http://yaoli.people.ust.hk/

Wei Qian

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

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