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Title:International competition, slim firms and wage inequality PDF Logo
Authors:Waelde, Klaus
Weiss, Pia
Issue Date:2004
Series/Report no.:CESifo working papers 1254
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 goods markets. The 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 losing in relative terms can even lose in real terms. From a quantitative perspective, international competition is shown to be the more plausible cause of rising wage inequality.
Subjects:international trade
wage inequality
foreign competition
free entry and exit
JEL:F12
J31
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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