Dalton Rongxuan Zhang

Job Market Paper

1. Revisit the aggregate cost of market power.
   When asset demand is imperfectly elastic, the cost depends on incidence of rents created by market power
   
   

2. Market power creates two opposing asset market forces:
   (i) Redistribution that creates excess asset demand; (ii) Asset creation creates excess asset supply.
   Derive a measurable analytical characterization (sufficient statistic) of which force dominates.
   
   

3. Redistribution dominates asset creation.
   Following the observed rise of markups, r* decreases by 220 basis points. Output is nearly unchanged, instead of falling by about 15 percent in a fixed return benchmark.
   
   

4. Cost of market power resurfaces mainly as inequality and aggregate output is largely stabilized.

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