Azar, J. (José)

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    Monopsony power in the labor market: From theory to policy
    (Annual Reviews, 2024-08) Azar, J. (José); Marinescu, I. (Ioana)
    Labor markets are not perfectly competitive: Monopsony power enables employers to pay workers less than the marginal revenue product of labor. We review three theoretical frameworks explaining monopsony power. Oligopsony models attribute it to strategic interactions among a limited number of firms. Job differentiation models cite imperfect job substitution and heterogeneous worker preferences. Search-and-matching models point to search frictions hindering instantaneous access to all available jobs. We then develop a theory-informed discussion of the empirical evidence on antitrust policies, policies that reduce barriers to job switching, and policies countering monopsony's effects on workers. Preventing mergers and regulating noncompetition agreements can increase wages by preserving competition among employers. Minimum wages can mitigate the effect of monopsony power by increasing wages without reducing employment. The insights garnered from both theoretical models and empirical evidence offer a road map for crafting policies that can enhance competition in the labor market.
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    General equilibrium oligopoly and ownership structure
    (Econometric Society, 2021-05) Azar, J. (José); Vives, X. (Xavier)
    We develop a tractable general equilibrium framework in which firms are large and have market power with respect to both products and labor, and in which a firm's decisions are affected by its ownership structure. We characterize the Cournot–Walras equilibrium of an economy where each firm maximizes a share‐weighted average of shareholder utilities—rendering the equilibrium independent of price normalization. In a one‐sector economy, if returns to scale are non‐increasing, then an increase in “effective” market concentration (which accounts for common ownership) leads to declines in employment, real wages, and the labor share. Yet when there are multiple sectors, due to an intersectoral pecuniary externality, an increase in common ownership could stimulate the economy when the elasticity of labor supply is high relative to the elasticity of substitution in product markets. We characterize for which ownership structures the monopolistically competitive limit or an oligopolistic one is attained as the number of sectors in the economy increases. When firms have heterogeneous constant returns to scale technologies, we find that an increase in common ownership leads to markets that are more concentrated.