Research

Working papers

Wage markups and buyer power in intermediate input markets 

How are market imperfections in different input markets related? I show theoretically that the extent of buyer power in intermediate input markets determines both wages and wages relative to the marginal revenue contribution of employees if collective bargaining characterizes labor markets. This relationship is examined empirically using data on the universe of Dutch manufacturing firms from 2007 to 2018. I find that buyer power for intermediates is widespread and can explain a substantial portion of within-industry-year wage dispersion. In years where firms have more buyer power, they overpay their employees more relative to their revenue contribution, suggesting that collective bargaining allows workers to extract rents from their employers. Using exchange rate shocks to instrument for buyer power, I find that buyer power indeed increases wages, both in absolute terms and relative to employees' marginal revenue contribution.

The anatomy of costs and firm performance: Evidence from Belgium (joint with Jan De Loecker, Catherine Fuss, and Nathan Quiller-Doust)

We separately measure variable costs of production and fixed or overhead costs, using novel firm-level data covering the Belgian economy over the last decades. In particular, we leverage a unique feature of the Belgian data, where we observe a breakdown of intermediate inputs into goods and services. This permits a deeper investigation into two potential drivers of the reported widening gap between firms’ revenue and variable input expenditure: technology and market power. We show that production technology has become more reliant on fixed costs over time. We relate these changes in firms’ cost structures to measures of firm performance and document that markups and gross profit rates increase as the role of fixed costs in production grows. Net profit rates also increase, suggesting that markups increase by more than necessary to cover the growing fixed costs. Unique survey data allows us to break down intermediates services further and show that our aggregate results largely represent individual components of services expenditure, such as external labor and capital rent.

Spillovers from legal cooperation to tacit collusion (joint with Jeroen Hinloopen and Stephen Martin)    Rej&R Economic Journal

working paper download  (KU Leuven Discussion Paper DPS23.12)

Antitrust laws prohibit collusion by private firms, yet many types of interfirm cooperation are legal. Using laboratory experiments, we study spillovers from legal cooperation in one market to tacit collusion in a different market. Subjects sequentially play two homogeneous goods Bertrand games once against the same opponent. We vary whether subjects can form binding price agreements in the first market. We find that allowing subjects to coordinate their prices in the first market significantly increases prices in the second market, elevating the incidence of non-competitive market prices by more than 60 percent. This shows that repeated interaction and communication are not necessary to achieve non-competitive prices, as long as subjects can form binding agreements in a different market. Additional treatments suggest that commitment and multimarket contact are both necessary and sufficient for spillovers from legal cooperation to tacit collusion to emerge.

Publications

Corporate social responsibility by joint agreement (joint with Maarten Pieter Schinkel) 

Journal of Environmental Economics and Management, 123, 2024.

working paper download (Tinbergen Institute Discussion Paper 2021-063/VII) 

Production agreements, sustainability investments, and consumer welfare (joint with Maarten Pieter Schinkel and Yossi Spiegel)

Economics Letters, 216, 2022.

working paper download (CEPR Discussion Paper No. DP16991)

Cartel stability in experimental first-price sealed-bid and English auctions (joint with Jeroen Hinloopen and Sander Onderstal)   

International Journal of Industrial Organization, 71, 2020.

working paper download (Tinbergen Institute Discussion Paper 2019-009/VII )

Book chapters

Publications in Dutch

Elf adviezen voor het gebruik van empirische methoden voor mededingingsbeleid (joint with Joris Pinkse and Jurre Thiel)

In: Haan, M. and M. P. Schinkel (eds.) KVS Preadviezen 2020 Mededingingsbeleid, Koninklijke Vereniging voor de Staathuishoudkunde, Amsterdam, 2020.

Beter geen mededingingsbeperkingen voor duurzaamheid (joint with Maarten Pieter Schinkel)

In: Haan, M. and M. P. Schinkel (eds.) KVS Preadviezen 2020 Mededingingsbeleid, Koninklijke Vereniging voor de Staathuishoudkunde, Amsterdam, 2020.