International competition, downsizing and wage inequality

Klaus Wälde () and Wei[ss], Pia

Journal of International Economics, 2007, vol. 73, issue 2, pages 396-406

Abstract: A country with Cournot competition and free entry experiences an increase of its market size either due to economic growth or international integration of its goods markets. This implied increase in competition leads to shrinking mark-ups and forces firms to reduce overhead costs relative to output. This implies a reallocation at the aggregate level from administrative to productive activities. Relative factor rewards change and wage inequality increases. The factor which loses in relative terms can even lose in real terms. From a quantitative perspective, international competition is demonstrated to be the more plausible cause of rising wage inequality.

View citations in EconPapers

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6V6D ... f2a39606ea8750735b00
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Access Statistics for this article

Journal of International Economics is edited by J. Eaton and C. M. Engel

More articles in Journal of International Economics from Elsevier
Series data maintained by Heidi Boesdal ().