Policy complementarities to curb market power and raise real wages

Abstract

Recent evidence suggests that anti-competitive behavior of firms negatively affects workers' real wages. Typically, policy actions relate to antitrust regulation and rarely to measures that curb employers' monopsony power. We show that policymakers who want to raise workers' real wages should address both types of market power simultaneously to gain from a policy complementarity.

Keywords: policy complementarity, market power, monopolistic competition, monopsony power, antitrust policy

JEL Classification: D21, D43, J42