Understanding buying power and technological change using production and cost models.

In this dissertation, I use a production and cost approach to study competition between and decision-making of firms on input markets. I study three concrete questions which all relate to the interaction between technological change and input market behavior. In the first chapter, I examine the effects of ownership consolidation among Chinese cigarette manufacturers on input market power, product market power and efficiency. I combine a structural model of production and input market competition with a natural experiment in which firms under certain production thresholds were forced to exit. I find that this consolidation led to an increase in tobacco leaf price markdowns of 35%, while cigarette price markups fell and efficiency remained constant. Increasing input market power had important distributional consequences: the consolidation explains 42% of the increase in income inequality between farmers and manufacturing workers in the tobacco industry after 2003. In a second chapter, I examine the link between monopsony power and factor-biased technical change. Monopsony power on input markets affects factor-biased technology adoption in two ways. First, it distorts relative input prices, which changes the benefits of directed technical change. Second, equilibrium input prices and quantities endogenously change when innovating. I show that monopsony power decreases the adoption of technologies that save on the input over which firms have monopsony power. Next, I test this result empirically using two inventions in the late 19th coal mining industry. Coal cutting machines augmented productivity of workers over which firms had monopsony power, while underground mining locomotives augmented inputs whose prices were exogenous. I find that mines at which markdowns were 10% higher were 23% less likely to adopt cutting machines, but not less likely to adopt mining locomotives. In the third chapter, I examine the relationship between the human capital level of managers and their production technology choices. Using plant-manager linked data, I examine how the introduction of mining engineering degrees in the US changed how coal mine managers chose between various new types of underground mining locomotives. I find that managers holding these degrees acquired information about new technologies differently. While ordinary managers had to rely on trial-and-error and information spillovers to find out that electrical engines were the optimal technology, managers with the mining engineering degrees knew this on beforehand. By adopting electrical locomotives faster, mining college graduates were able to increase total factor productivity by 5.5% per year.

Jaar van publicatie:2020

Toegankelijkheid:Open