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UID:a4df58004d42bece3d6c28ce85ac91bf
CATEGORIES:Seminars
CREATED:20230405T125300
SUMMARY:LUNCH SEMINAR: Salvatore Lo Bello - Bank of Italy
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:\n\nEquilibrium Effects of the Minimum Wage: The Role of Product Market Pow
 er\n\n\nAbstract:\nWe study the role of product market power in the equilib
 rium effects of the minimum wage. Higher minimum wages are known to induce 
 workers' reallocation from small to larger firms. If firms set prices strat
 egically, they optimally respond to larger market shares by raising their m
 arkups. We call this novel mechanism concentration channel of the minimum w
 age. We show that product market power can overturn the commonly-held view 
 that higher minimum wages boost the aggregate labor share. On the one hand,
  the minimum wage pushes the labor share up by compressing firms' monopsony
  power on the labor market. On the other hand, the concentration channel de
 presses the labor share by fuelling firms' monopoly power on the product ma
 rket. Consistently with our theory, we document on Italian balance-sheet da
 ta that the firm-level labor share response to higher sectoral minimum wage
 s is decreasing in product market concentration. To quantify the aggregate 
 labor share response, we construct a novel structural model embedding frict
 ional labor markets and oligopolistically-competitive product markets. We e
 stimate the model on Italian social security data replicating key labor mar
 ket statistics for different worker types and the detailed structure of sec
 toral product markets. We find that the labor share is hump-shaped in the l
 evel of minimum wage with a peak around the median wage. Our results stress
  the importance of factoring in product market power for a correct evaluati
 on of minimum wage reforms.\n
DTSTAMP:20260404T090238Z
DTSTART:20230519T010000Z
DTEND:20230519T140000Z
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