Market concentration and the relative demand for college‐educated labour

Anders Akerman

Economica, 2024, vol. 91, issue 361, 292-319

Abstract: If large firms employ relatively more educated workers, will an increase in market concentration increase income inequality by raising the relative demand for skill? I use Swedish employer–employee data from 1997–2016 and find a strong correlation between firm size and the share of college‐educated (‘skilled’) workers. An increase in a sector's market concentration is correlated with a higher skilled wage premium and higher relative employment of skilled workers. This is due mainly to the reallocation of workers across firms. I demonstrate how these findings can be explained by a model of heterogeneous firms where productivity and skill intensity are positively correlated.

Date: 2024
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