Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/21332
Authors: 
Guadalupe, Maria
Year of Publication: 
2005
Series/Report no.: 
IZA Discussion paper series 1556
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.
Subjects: 
wage structure
returns to skill
product market competition
JEL: 
D21
L22
J33
J31
Document Type: 
Working Paper

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