Market Imperfections and Wage Inequality

Klas Sandén ()
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Klas Sandén: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG

No 264, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: This paper investigates the relationship between various market imperfections and the skill premium. The model in this paper assumes perfectly competitive labor markets but distorted product and financial markets. The model predicts that the skill premium is positively correlated with market power, modeled using preference for variety, and shorter product cycles. The effect from financial market distortions or taxes on financial income is ambiguous. Positive external effects among firms developing new goods decrease the skill premium.

Keywords: Wage Inequality; Monopolistic Competition; Innovation (search for similar items in EconPapers)
JEL-codes: D33 D43 D50 D91 D92 J31 L13 O31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-09-10
New Economics Papers: this item is included in nep-bec, nep-com, nep-lab and nep-mic
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