Speaker: Dalton Zhang
Title: Monopoly and Monopsony in General Equilibrium
Abstract: We study the general equilibrium effects of labor market power and their implications for secular macroeconomic trends, including declining interest rates and labor shares, and rising profits and inequality. We show that wage markdowns are largely neutral for aggregate output in general equilibrium under inelastic factor supply, contradicting partial-equilibrium intuition, whereas markups are highly distortionary. Markdowns instead act as redistribution shocks from wages to profits. With imperfectly elastic asset demand, this redistribution feeds back through portfolio choice, decreasing interest rates, increasing inequality, and generating large welfare consequences despite possibly modest effects on output.
Maggie Hendrix
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