Labor Market Power in Food Retailing. Job Market Paper. Please email for draft.
Papers
Minimum Wages and Pass-Through (with Timothy J. Richards). Accepted, American Journal of Agricultural Economics. [ Abstract | SSRN (Older) | Current Draft | Slides]
Retail food prices rose dramatically in late 2021. Some argue that this “food price inflation” was due to “greedflation” or firms increasing downstream prices simply because they can. In this study, we investigate the sources of “overshifting” store-level cost shocks into downstream prices, or the apparent ability of retailers to pass along price increases that are proportionately larger than increases in cost. We use exogenous changes in minimum wages as our setting, and study how food retailers pass increases in labor costs along to consumers in the form of higher food prices. We derive a new theoretical model of retail price pass-through, and show that demand curvature, market power, and consumer search behavior each likely affect observed rates of retail price pass-through. Our structural analysis shows that, after controlling for the primary determinants of wage pass-through, market power and demand curvature explain much of the variation in cost pass-through, although general price inflation has an important role in accentuating the rate of minimum-wage pass-through. Our findings have important implications for minimum wage policy, and for understanding the role of cost shocks in food price inflation.
Conferences: EARIE 2024
A poster won the first place at ASU Social Science Poster Contest in November 2023.
Farmworker Bargaining in US Agricultural Labor Markets (with Timothy J. Richards). Accepted, Applied Economic Perspectives and Policy. [ Abstract | SSRN | Slides]
''Superstar firms'' can be large and successful without necessarily exploiting market power over labor markets (Autor et al. 2020). In this paper, we examine this idea in an agricultural labor market setting by studying the empirical relationship between employment surplus, which is essentially the excess of a worker's value marginal product over their wage, and wages. We use a model of search, match, and bargaining that explains how the surplus from worker's productivity is split between workers and employers. Our estimates show that workers' mean productivity is $8.67 per hour, and they receive 24.2% of employment surplus, but both exhibit substantial heterogeneity over workers. Heterogeneity in productivity and bargaining power suggests that workers who are able to generate ''a bigger pie'', may also earn a larger share of it. Consistent with this notion, our analysis shows a robust positive elasticity of surplus with observed wages, implying that agricultural firms gain more (surplus) by paying their workers higher wages and not necessarily through exploitation or ``winner-take-all'' strategy.
Conferences/Seminars: AAEA 2024; ETH Zürich 2024
Retail Concentration and Wages (with Timothy J. Richards and Keenan Marchesi). Revise and Resubmit, Review of Industrial Organization. [ Abstract | SSRN ]
Antitrust policy in the U.S. now explicitly includes labor-market outcomes as measures of interest when considering the potential anticompetitive effects of mergers or acquisitions. Concentration in the food retailing industry is of particular concern due to several recent high-profile mergers, and a troubling increase in concentration at the national and local levels. We study this problem using both causal reduced-form models and a structural model of search, match, and bargaining. Our reduced-form models show no relationship between concentration and wages, but our structural model finds that concentration is associated with substantial wage suppression.
Mergers and acquisitions tend to affect the prices and varieties offered by the merging firms. However, most of the existing research considers mergers between firms that interact on the same platform, such as between two online firms, or two firms on the same physical platform. To our knowledge, there is no empirical research on the price effects of integration across different platforms. Such cross-platform mergers likely have substantially different impacts on prices because indirect network effects are much weaker for physical firms than those that interact in low-cost environments having long-tail effects due to lower search costs and fewer constraints on physical inventory. We investigate this problem by analyzing the effects of an acquisition of a national grocery chain by a large online retailer in the United States. Our study differs from prior studies on mergers and acquisitions as the incentives to merge involve not only the usual market power and efficiency arguments, but accessing stronger, indirect network externalities as well. Because the decision to merge is endogenous, identifying merger effects is empirically difficult. We use a doubly-robust causal inference method to address this problem, and we find an evidence of a decrease in price levels in 8 out of 10 treated markets.
