Labor market power, product market power and the wage structure:a note

A burgeoning literature in labor economics is focused on modelling employer labor market power, generally finding nontrivial estimates of monopsony power. A smaller literature also simultaneously incorporates product market power. Deb et al. (2023) is an example of applying an oligopoly-oligopsony model to the US labor market, arguing for important effects on wage levels and inequality from rising market power. I support combining IO and labor as a fruitful way of studying wages and business dynamism but argue for looking more broadly at (i) differential degrees of employer power in labor and product markets; (ii) investigating the dynamic sources of markups (e.g. through innovation) and (iii) considering wage bargaining models, not just wage posting models, which have some starkly different implications for wage setting.