New Technology Diffusion: Implications for Monopsony Power, Markups, and Labor Share

This paper investigates the potential implications of ignoring heterogeneity in production technology at each plant on monopsony power and markups.

We collect plant-level data where we directly observe the types of production technology during new technology diffusion.

We demonstrate that estimating a common production function for all plants results in upward trends in both monopsony power, measured by the differences in growth rates of MRPL and wages, and markups, obtained by production approach.

However, accounting for production technology in the analysis eliminates these upward trends, highlighting the importance of controlling for heterogeneity in production technology even within a narrowly-defined industry