Resource title

Product Market Competition, Returns to Skill and Wage Inequality

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Resource description

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.

Resource author

Maria Guadalupe

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/21332

Resource license

Adapt according to the presented license agreement and reference the original author.