Markups and income inequality: Causal links, 1975-2011

Minsoo Han and Ju Hyun Pyun

Journal of Comparative Economics, 2021, vol. 49, issue 2, 290-312

Abstract: Using data for 20 countries during 1975–2011, this study provides new evidence on the association between the lack of competition, measured by an increase in markups, and income inequality. We find that an increase in markups is positively associated with rising income inequality. More interestingly, not only do extra profits from higher markups accrue to the top-income group, but also, within the top-income group (top 10%), the higher top-income earners (top 1%) tend to benefit disproportionately more than the lower top-income earners (top 5% or 10%). Finally, we highlight the role of labor market policies; the positive relationship between markups and income inequality is less pronounced in countries with better labor protection such as the statutory protection and power of labor unions, generous unemployment benefits, and mandatory minimum wages.

Keywords: Income Inequality; Top-income shares; Competition; Markups; Labor market institutions (search for similar items in EconPapers)
JEL-codes: D30 D40 D63 J08 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:49:y:2021:i:2:p:290-312

DOI: 10.1016/j.jce.2020.12.002

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