Product market competition returns to skill and wage inequality

Guadalupe, Maria (2005) Product market competition returns to skill and wage inequality. CEPDP, 686. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 0753018667

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Abstract

This paper shows that increasing product market competition can have a direct impact on the employment relationship and on wage inequality. I develop a simple model in which an increase in product market competition increases returns to skill through the effect of competition on the sensitivity of profits to cost reductions. I then show empirically that relative wages increase with competition using a large panel of United Kingdom workers with complete work histories. I identify the impact of competition on returns to skill in the panel, using two exogenous measures of competition provided by two quasi-natural experiments. Quantile regressions indicate that increased competition also raised returns to unobserved ability.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk
Additional Information:	© 2005 Maria Guadalupe
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HD Industries. Land use. Labor
JEL classification:	J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages; Payment Methods L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure: Markets vs. Hierarchies; Vertical Integration; Conglomerates; Subsidiaries J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc. D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior
Sets:	Collections > Economists Online Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited:	24 Jul 2008 08:42
Last Modified:	01 Oct 2010 09:13
URI:	http://eprints.lse.ac.uk/id/eprint/19895

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