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Infrastructure Investment and Labor Monopsony Power

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  • Wyatt Brooks
  • Joseph P. Kaboski
  • Illenin O. Kondo
  • Yao Amber Li
  • Wei Qian

Abstract

In this paper we study whether or not transportation infrastructure disrupts local monopsony power in labor markets using an expansion of the national highway system in India. Using panel data on manufacturing firms, we find that monopsony power in labor markets is reduced among firms near newly constructed highways relative to firms that remain far from highways. We estimate that the highways reduce labor markdowns significantly. We use changes in the composition of inputs to identify these effects separately from the reduction of output markups that occurs simultaneously. The impacts of highway construction are therefore pro-competitive in both output and input markets, and act to increase the share of income that labor receives by 1.8--2.3 percentage points.

Suggested Citation

  • Wyatt Brooks & Joseph P. Kaboski & Illenin O. Kondo & Yao Amber Li & Wei Qian, 2021. "Infrastructure Investment and Labor Monopsony Power," NBER Working Papers 28977, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28977
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    Cited by:

    1. Ziran Ding & Jose Garcia‐Louzao & Valentin Jouvanceau, 2025. "The dynamics of product and labour market power: Evidence from Lithuania," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 33(1), pages 165-194, January.
    2. Pérez, Jorge & Vial, Felipe & Zárate, Román, 2022. "Urban Transit Infrastructure: Spatial Mismatch and Labor Market Power," Research Department working papers 1992, CAF Development Bank Of Latinamerica.
    3. Bossavie, Laurent & Cho, Yoonyoung & Heath, Rachel, 2023. "The effects of international scrutiny on manufacturing workers: Evidence from the Rana Plaza collapse in Bangladesh," Journal of Development Economics, Elsevier, vol. 163(C).
    4. Passmore, Reid & Watkins, Kari E. & Guensler, Randall, 2021. "BikewaySim Technology Transfer: City of Atlanta, Georgia," Institute of Transportation Studies, Working Paper Series qt23n9389j, Institute of Transportation Studies, UC Davis.
    5. Alejandro Estefan & Roberto Gerhard & Joseph P. Kaboski & Illenin O. Kondo & Wei Qian, 2024. "Outsourcing Policy and Worker Outcomes: Causal Evidence from a Mexican Ban," Opportunity and Inclusive Growth Institute Working Papers 084, Federal Reserve Bank of Minneapolis.
    6. Chau, Nancy H. & Kanbur, Ravi & Soundararajan, Vidhya, 2022. "Employer Power and Employment in Developing Countries," IZA Discussion Papers 15514, Institute of Labor Economics (IZA).
    7. Chen Yeh & Claudia Macaluso & Brad Hershbein, 2022. "Monopsony in the US Labor Market," American Economic Review, American Economic Association, vol. 112(7), pages 2099-2138, July.
    8. Schiavone, Ansel, 2023. "Labor market concentration and labor share dynamics for US regional industries," Economic Modelling, Elsevier, vol. 125(C).

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    More about this item

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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