Discussion paper
DP17785 Input and Output Market Power with Non-neutral Productivity: Livestock and Labor in U.S. Meatpacking.
Identification of firm input and output market power requires unbiased
estimation of production elasticities. We propose a method
that is robust to biased technological change and apply it with panel
data on plants in the highly concentrated U.S. meatpacking industry,
which is often suspected of exploiting livestock farmers and immigrant
workers. Inference can be checked by assessing how much each market
contributes to gross profits. We reject the exercise of market power
in the livestock market but find that some firms exploit their share
of local employment to set wages with an important markdown, and
exercise some product market power.
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