TY  - RPRT
        AU  - Bachmann, Rüdiger
AU  - Bayer, Christian
AU  - Stüber, Heiko
AU  - Wellschmied, Felix
        TI  - Monopsony Makes Firms Not Only Small but Also Unproductive: Why East Germany Has Not Converged
        PY  - 2022/May/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 15293
        UR  - https://www.iza.org/index.php/publications/dp15293
        AB  - 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 size-wage 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 predicts 10 percent lower aggregate labor productivity in East Germany.
        KW  - aggregate productivity
KW  - plant heterogeneity
KW  - unions
KW  - monopsony power
KW  - size-wage curve
KW  - monopolistic competition
KW  - customer capital
KW  - size distortions
        ER  -