Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Krugman

with 2 comments

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Had not spotted this one.

Krugman on market concentration (referring to an interesting study):

We don’t talk much about monopoly power these days; antitrust enforcement largely collapsed during the Reagan years and has never really recovered. Yet Barry Lynn and Phillip Longman of the New America Foundation argue, persuasively in my view, that increasing business concentration could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees“.

Am intrigued.

I see the link between excessive concentration and high profits.

But I am less comfy with the nexus between excessive concentration and stagnating labor demand.

The point is: I am not sure that less industrial concentration would bring about more jobs.

And I don’t really get it how more competition would, as such, induce corporations to pass-on profits to employees.

Written by Nicolas Petit

5 August 2013 at 7:04 pm

Posted in Uncategorized

2 Responses

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  1. I see the link between concentration and job loss: obviously many mergers result in lay offs – if not negotiated up-front at the time of the negotiations, they end up happening a couple of years down the road when function duplications become apparent. (although in real like I’ve seen that valuation is systematically wrong (where investment managers generally underestimate the costs of firing – think of indemnifications to be paid in France….) and in all post merger integrations where they realise that culture differences and politics may the process of laying off much more difficult than planned). So I see how concentration can stagnate job creation because of reorganisations and the inherent duplication of staff with the same functions. Now, with or without concentration, I don’t see the link either with profit sharing with employees – unless we are talking about the big bonuses that top management may get for cutting costs and firing more people?

    Mirna Hidalgo

    6 August 2013 at 8:38 am

  2. If Krugman is talking at an Econ 101 level, he presumably means that as there are fewer buyers for the supply of labor, while the supply remains large and disaggregated (i.e. non-unionized), those buyers obtain monopsony (oligopsony?) positions.

    PG

    7 August 2013 at 9:04 pm


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