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Title:Product Market Competition, Returns to Skill and Wage Inequality PDF Logo
Authors:Guadalupe, Maria
Issue Date: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
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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