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The Dynamics of Product and Labor Market Power: Evidence from Lithuania

Author

Listed:
  • Ziran Ding

    (Bank of Lithuania and KTU)

  • Jose Garcia-Louzao

    (Bank of Lithuania and Vilnius University)

  • Valentin Jouvanceau

    (Bank of Lithuania)

Abstract

This paper characterizes the power dynamics of firms in both product and labor markets in Lithuania between 2004 and 2018. We first show that both markets are not perfectly competitive, as both price markups and wage markdowns are far from unitary and homogeneous. Interestingly, we unveil that the Dynamics of these margins followed different patterns. On the one hand, both the dispersijon and the economy-wide markup have increased, indicative of an increase in product market power. On the other hand, we document a decline in monopsony power, as both the heterogeneity and the aggregate level of markdowns have declined. Altogether, our results underline the importance of jointly analyzing product and labor markets when assessing firms’ market power.

Suggested Citation

  • Ziran Ding & Jose Garcia-Louzao & Valentin Jouvanceau, 2023. "The Dynamics of Product and Labor Market Power: Evidence from Lithuania," Bank of Lithuania Working Paper Series 118, Bank of Lithuania.
    • Handle: RePEc:lie:wpaper:118
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    References listed on IDEAS

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    More about this item

    Keywords

    Firm heterogeneity; Monopoly; Markups; Monopsony; Markdowns;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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