Seminar in Economics | Monopsony Makes Firms not only Small but also Unproductive: Why East Germany has not Converged with Christian Bayer

Department of Economics welcomes you to a seminar with Christian Bayer, University of Bonn, presenting "Monopsony Makes Firms not only Small but also Unproductive: Why East Germany has not Converged". When employers face a trade-off between growing large and paying low wages—that is, when they have monopsony power—some productive employers will decide to acquire fewer customers, forgo sales, and remain small. Using high-quality administrative data from Germany, we document that East German plants (compared to West German ones) face a steeper sizewage curve, invest less into marketing, and remain smaller.

Start time: 2022-02-16 at 15:30

End time: 2022-02-16 at 16:45

Location: Webinar

Welcome to this Higher Seminar in Economics organised by the Department of Economics, SSE. The seminar speaker is Christian Bayer, Professor of Economics, University of Bonn, who will present "Monopsony Makes Firms not only Small but also Unproductive: Why East Germany has not Converged".

Abstract

When employers face a trade-off between growing large and paying low
wages—that is, when they have monopsony power—some productive employers will decide to acquire fewer customers, forgo sales, and remain small.

These decisions have adverse consequences for aggregate labor productivity.
Using high-quality administrative data from Germany, we document that
East German plants (compared to West German ones) face a steeper sizewage curve, invest less into marketing, and remain smaller. A model with
labor market monopsony, product market power, and customer acquisition
matching these features of the data produces 10 percent lower aggregate
labor productivity in East Germany.

Christian Bayer is Professor of Economics at University of Bonn. Christian is a macroeconomist whose research focuses on investments of firms and household savings in environments with heterogeneous agents, on worker, job-, and firm dynamics, as well as the macroeconomic implications of financial frictions. His research combines in-depth empirical analysis of micro data for macroeconomic questions and theoretical, quantitative work that uses state-of-the-art numerical techniques to solve and simulate general equilibrium models of heterogeneous agents.