Firm dynamics, monopsony, and aggregate productivity differences

Thu, 01 Jan 2026 00:00:00 +0000

Research question and motivation. Firms are larger and grow faster over the life cycle in high-income countries, while labor markets in poorer countries are less competitive (employers hold more wage-setting power). The paper asks how important employer labor market power (monopsony) is for explaining cross-country differences in firm dynamics and aggregate productivity. The novelty is that beyond the standard static misallocation-of-workers channel, monopsony also distorts selection into entrepreneurship and productivity-enhancing technology adoption, potentially making the losses larger than prior static estimates suggest.

Tancredi Rapone | Macro Paper Warehouse

Firm dynamics, monopsony, and aggregate productivity differences