Skip to main content
Article thumbnail
Location of Repository

Product market competition returns to skill and wage inequality

By Maria Guadalupe


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

Topics: HF Commerce, HD Industries. Land use. Labor
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 2005
OAI identifier:
Provided by: LSE Research Online

Suggested articles


  1. (1996). a), “Deregulation and labor earnings in the airline industry”, doi
  2. (1996). b), “The Effect of Unions on the Structure of Wages: A Longitudinal Analysis” doi
  3. (1994). Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufactures”, doi
  4. (1996). Competition and Corporate Performance”, doi
  5. (2002). Competition and Innovation: An Inverted U Relationship” doi
  6. (1999). Competition, entry and the social returns to infrastructure in transition economies” doi
  7. (2002). Competition: the case of asymmetric firms”, mimeo
  8. (1998). Computing Inequality: Have Computers Changed the Labor Market”, doi
  9. (2001). Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry”, NBER working paper w8211, doi
  10. (2003). Does product market competition shape incentive contracts?”, mimeo doi
  11. (2000). Earnings, Rents, and Competition in the Airline Labor Market”, doi
  12. (1988). Efficiency wages and interindustry wage structure, doi
  13. (1987). Exchange Rates and Prices”, doi
  14. (2003). Executive compensation and product market competition”, mimeo doi
  15. (1992). Exporting jobs? The impact of import competition on employment and wages in U.S. manufacturing, doi
  16. (1999). From the invisible handshake to the invisible hand: how product market competition changes the employment relationship” doi
  17. (2002). How Much Should We Trust Difference-in-Difference Estimates?’ NBER working paper, doi
  18. (2003). How workers fare when employers innovate”, NBER working paper, doi
  19. (1988). Hyteresis in Import Prices: The Beachhead Effect’, doi
  20. (2003). Inequality and Organization in a Knowledge Economy” Mimeo, doi
  21. (1997). Institutional Changes and Rising Wage Inequality: Is There a Linkage?”, doi
  22. (1987). Labor Rent-Sharing and Regulation: Evidence from the Trucking Industry”, doi
  23. (1997). Macroeconomic Effects of Product Market Competition in a Dynamic Efficiency Wage Model”, doi
  24. (2003). Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets”, doi
  25. (1999). Market Share, Market Value and Innovation in a doi
  26. (1977). Monopolistic Competition and Optimum Product Diversity”, doi
  27. (1989). Persistent Trade Effects of Large Exchange Rate Shocks’ doi
  28. (2001). Product market competition, efficiency and agency costs: an empirical analysis”, IFS working paper
  29. (1986). Random Group Effects and the Precision of Regression Estimates”, doi
  30. (2002). Skill-biased technological change and rising wage inequality: some problems and puzzles”, doi
  31. (2001). Skilled-biased organizational change? Evidence from a panel of British and French establishments”, doi
  32. Social class and the standard occupational classifications”,
  33. (1996). The Creation and Capture of Rents: Wages and Innovation in a Panel of U.K. doi
  34. (1997). The decline of labour market institutions and the rise in wage inequality”, doi
  35. (2001). The Division of Spoils: Rent-Sharing and Discrimination in a Regulated Industry”, doi
  36. (2003). The Effect of Exchange Rates doi
  37. (2001). The Effect of unions on wage inequality in the U.S. labor market” doi
  38. (1993). The effects of product market competition on collective bargaining agreements: The case of foreign competition in Canada”, doi
  39. (1986). The impact of deregulation on the employment and wages of airline mechanics”, doi
  40. (1994). The single market programme as a stimulus to change: doi
  41. (1993). Trucking Deregulation, Unionization, and Earnings: Is the Union Premium a Compensating Differential?” doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.