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POID Research Seminar

Labour market power and aggregate productivity

Bernardo Mottironi (LSE)


Tuesday 05 November 2024 11:00 - 11:45

This event is both online and in person

SAL 2.04, 2nd Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH

About this event

This paper offers a novel perspective on the general equilibrium effects of labour market power. By developing a tractable model of entrepreneurship with monopsonistic labour markets and endogenous technology adoption, I show that labour market power diminishes aggregate productivity through three distinct channels: (i) misallocation of workers towards small firms, (ii) excess entry of low-ability entrepreneurs, and (iii) limited diffusion of productivity-enhancing technologies. The proposed theory generates a set of testable predictions, which I validate using microdata on Italian firms. To quantify losses, I calibrate the model with a combination of micro and macro data. My results reveal a significant impact of monopsony power: the average local labour market suffers a 27% drop in aggregate productivity from a competitive benchmark, with excess entry and limited technology diffusion as dominant factors. Lastly, I assess the potential of policy interventions to mitigate these outcomes.


Participants are expected to adhere to the Events Code of Conduct.


This event will take place in SAL 2.04, 2nd Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH.

The building is labelled SAL on the map. Enter the building via Lincoln's Inn Fields.

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