Product Market Competition, Returns to Skill and Wage Inequality

By Maria Guadalupe. Social Science Research Network, 2005

157 citations recorded by the source corpus.

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.

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Citations in the corpus

When Necessity Becomes a Virtue: The Effect of Product Market Competition on Corporate Social Responsibility (2010, methodology): “We follow Xu (2006) and Guadalupe (2007) using the time variation of tariffs as”
Globalization and the Provision of Incentives inside the Firm: The Effect of Foreign Competition (2009, unknown): “This is the natural logarithm of the sum of salary, bonus, total value of stock options granted (valued using the standard Black-Scholes formula), total value of restricted stock granted, long-term incentive payouts and other annual compensation.(17) We also define and the logarithm of salary plus b”
A simple model of firm heterogeneity, international trade, and wages (2005, background): “In another study, by observing a large panel of United Kingdom workers, Guadalupe (2007) showed a positive relationship between skill of workers and their wages through competitiveness of the market.”