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RUBENS Michal (KU Leuven) “Ownership consolidation, monopsony power and efficiency”

January 10, 11:30 am - 12:45 pm

Time: 12:30pm – 13:45 pm
Date:10th of January 2020
Place: Room 3001

RUBENS Michael (KU Leuven) “Ownership consolidation, monopsony power and efficiency”

Abstract : This paper examines the effects of ownership consolidation among Chinese cigarette
manufacturers on monopsony power, product market power and productive efficiency.
I combine a structural model of production and input market competition
with a natural experiment in which firms under certain production quantity thresholds
were forced to exit. This consolidation led to an increase in tobacco leaf price
markdowns of 37%, while cigarette price markups fell by 23%. Although the objective
of the consolidation policy was to increase efficiency, I do not find strong
evidence for such gains. Rising monopsony power has important distributional
consequences. The policy of forcing small manufacturers to exit explains 42% of
the increase in income inequality between farmers and manufacturing workers in
the tobacco industry between 2003 and 2006.


January 10
11:30 am - 12:45 pm
Event Category:


Michael VISSER