Product Market Competition, Returns to Skill and Wage Inequality

Maria Guadalupe ()

No 1556, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: product market competition; returns to skill; wage structure (search for similar items in EconPapers)
JEL-codes: D21 J31 J33 L22 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2005-04
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (3)

Published - published in: Journal of Labor Economics, 2007, 25 (3), 439-474

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Related works:
Journal Article: Product Market Competition, Returns to Skill, and Wage Inequality (2007)
Working Paper: Product Market Competition Returns to Skill and Wage Inequality (2005)
Working Paper: Product market competition returns to skill and wage inequality (2005)
Working Paper: Product Market Competition, Returns to Skill and Wage Inequality (2004)
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