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IFS Postdoc Seminar presented by Michael Rubens (KU Leuven)

27 February 2020, 2:15 pm–3:30 pm

IFS seminar

Ownership consolidation, monopsony power and efficiency: Evidence from the Chinese tobacco industry

Event Information

Open to

All

Availability

Yes

Organiser

Institute of Fiscal Studies

Location

IFS Basement
IFS
7 Ridgemount Street
London
WC1E 7AE
United Kingdom

Abstract: This paper examines 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 20%, while cigarette price markups and efficiency remained constant. This increase in input market power had important distributional consequences: the consolidation explains 30% of the increase in income inequality between farmers and manufacturing workers, and 75% of manufacturing profit growth after 2003.

About the Speaker

Michael Rubens

at KU Leuven

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