Market Power And Wage Inequality
September 2022
Working Paper Number:
CES-22-37
Abstract
We propose a theory of how market power affects wage inequality. We ask how goods and labor market power jointly affect the level of wages, the Skill Premium, and wage inequality. We then use detailed microdata from the US Census between 1997 and 2016 to estimate the parameters of labor supply, technology and the market structure. We find that a less competitive market structure lowers the wage level, contributes 7% to the rise in the Skill Premium and accounts for half of the increase in between-establishment wage variance.
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demand,
market,
macroeconomic,
endogeneity,
payroll,
industrial,
earnings,
employ,
labor,
monopolistic,
productivity wage,
oligopolistic,
profit,
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wage growth,
wage data,
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Center for Economic Studies,
Ordinary Least Squares,
Total Factor Productivity,
Longitudinal Business Database,
Decennial Census,
Census of Manufacturing Firms,
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North American Industry Classification System,
American Community Survey,
Longitudinal Employer Household Dynamics,
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