Monopsony makes firms not only small but also unproductive
Differences in labour market outcomes between East and West Germany persist, 30 years after reunification. Using high-quality administrative data from Germany, this column documents that East German plants face a steeper size–wage curve than West German ones, invest less in marketing, remain smaller, and, on average, pay lower wages. A model with labour market monopsony,
Source: voxeu.org