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Product Market Competition Wages and Productivity: International Evidence from Establishment-Level Data

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  • David BLANCHFLOWER
  • Stephen MACHIN

Abstract

That greater product market competition has the potential to affect outcomes in labour and product markets is borne out by one of the key premises of standard economic theory which predicts that, all other things held constant, prices should be lower and efficiency enhanced by more competition. In this paper we test this notion by considering the relationship between product market competition and establishment-level wages and economic performance. We use two microeconomic data sources from Britain and Australia to consider this relationship. Our results find only a limited role for market competition to impact on wages and productivity. In British workplaces, labour productivity is not raised by more competition, whilst in Australia we can only find evidence of the conventionally expected positive impact in manufacturing workplaces. With respect to wages, the results are more consistent with the competition hypothesis, though effects are not that strong, with significant effects only being found for some of the skill groups within our samples of establishments. Hence, there is only limited support for the key hypothesis of interest that we consider.

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Bibliographic Info

Article provided by ENSAE in its journal Annals of Economics and Statistics.

Volume (Year): (1996)
Issue (Month): 41-42 ()
Pages: 219-253

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Handle: RePEc:adr:anecst:y:1996:i:41-42:p:10

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Cited by:
  1. Saul Estrin & Jozef Konings & Zbigniew Zolkiewski & Manuela Angelucci, 2001. "The Effect of Ownership and Competitive Pressure on Firm Performance in Transition Countries. Micro Evidence from Bulgaria, Romania and Poland," LICOS Discussion Papers 10401, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  2. Giuseppe Nicoletti & Stefano Scarpetta, 2003. "Regulation, productivity and growth: OECD evidence," Economic Policy, CEPR & CES & MSH, vol. 18(36), pages 9-72, 04.
  3. Scarpetta, Stefano & Tressel, Thierry, 2004. "Boosting productivity via innovation and adoption of new technologies : any role for labor market institutions?," Social Protection Discussion Papers 29144, The World Bank.
  4. Orazem, Peter F. & Vodopivec, Milan, 2003. "Do Market Pressures Induce Economic Efficiency: The Case of Slovenian Manufacturing, 1994-2001," IZA Discussion Papers 901, Institute for the Study of Labor (IZA).
  5. Disney, Richard F & Haskel, Jonathan & Heden, Ylva, 2000. "Restructuring And Productivity Growth In UK Manufacturing," CEPR Discussion Papers 2463, C.E.P.R. Discussion Papers.
  6. Bernd Görzig & Martin Gornig & Axel Werwatz, 2004. "East Germany's Wage Gap: A Non-Parametric Decomposition Based on Establishment Characteristics," Discussion Papers of DIW Berlin 451, DIW Berlin, German Institute for Economic Research.
  7. Bernd Gorzig & Martin Gornig & Axel Werwatz, 2005. "Explaining Eastern Germany's Wage Gap: The Impact of Structural Change," Post-Communist Economies, Taylor & Francis Journals, vol. 17(4), pages 449-464.
  8. Blanchflower, D-G, 1997. "Changes Over Time in Union Relative Wage Effects in Great Britain and the United States," Papers 15, Centre for Economic Performance & Institute of Economics.
  9. Vesna Stavrevska, 2011. "The efficiency wages perspective to wage rigidity in the open economy: a survey," International Journal of Manpower, Emerald Group Publishing, vol. 32(3), pages 273-299, July.
  10. Brown, J David & Earle, John S, 2000. "Competition And Firm Performance: Lessons From Russia," CEPR Discussion Papers 2444, C.E.P.R. Discussion Papers.
  11. Brown, J David & Earle, John S, 2001. "Competition Enhancing Policies and Infrastructure: Evidence from Russia," CEPR Discussion Papers 3022, C.E.P.R. Discussion Papers.

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