Nuremberg Research Seminar in Economics on 28 April 2021

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You are invited to join the weekly Nuremberg Research Seminar in Economics on 28 April 2021 at 13:15. The seminar will be held via Zoom. Christian Bayer (University of Bonn) will be talking about “Monopsony Makes Firms not only Small but also Unproductive: Why East Germany has not Converged”.

Please find below the abstract:

This paper documents that a steeper size-wage relationship, reflecting monopsony power, leads to aggregate productivity losses. We use this insight to understand the persistent labor productivity differences between West and East Germany. We employ high-quality administrative data to show that productivity differences between East and West Germany are related to a compressed plant-size distribution in East Germany. What is more, we show that the plant-size distribution is more compressed in those sectors where the size-wage relationship is steeper. Using a model of plant entry and customer accumulation, we show that differences in the size-wage relationships explain 10 percentage points lower labor productivity in the East German private sector, that is, approximately one third of its total labor productivity difference.