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Firm heterogeneity in capital-labour ratios and wage inequality

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  • Marco Leonardi

Abstract

This article documents the increasing dispersion of capital-labour ratios across firms in the US and provides some empirical evidence of a positive correlation at the two-digit industry level between the dispersion of capital-labour ratios across firms and residual wage inequality. To explain this empirical fact, the article adopts a search model where the exogenous decline in the relative price of equipment capital makes the distribution of capital-labour ratios more dispersed and increases wage dispersion among identical workers. OLS estimates of the relationship between capital dispersion and the relative price of equipment capital support the main hypothesis of the model. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 117 (2007)
Issue (Month): 518 (03)
Pages: 375-398

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Handle: RePEc:ecj:econjl:v:117:y:2007:i:518:p:375-398

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Cited by:
  1. Yannick Kalantzis & Ryo Kambayashi & S├ębastien Lechevalier, 2012. "Wage and Productivity Differentials in Japan: The Role of Labor Market Mechanisms," LABOUR, CEIS, vol. 26(4), pages 514-541, December.
  2. Julian Emami Namini & Giovanni Facchini & Ricardo A. Lopez, 2011. "Export Growth and Factor Market Competition: Theory and Evidence," Development Working Papers 309, Centro Studi Luca d\'Agliano, University of Milano, revised 09 May 2011.
  3. Mauro Caselli, 2010. "Trade liberalisation, skill-biased technical change and wages in developing countries: a model with heterogeneous firms," CSAE Working Paper Series 2010-27, Centre for the Study of African Economies, University of Oxford.
  4. Yip, Chi Man, 2010. "Can't SBTC explain the U.S. wage inequality dynamics?," MPRA Paper 31198, University Library of Munich, Germany.
  5. Mauro Caselli, 2014. "Trade, skill-biased technical change and wages in Mexican manufacturing," Applied Economics, Taylor & Francis Journals, vol. 46(3), pages 336-348, January.
  6. Silvio Contessi & Francesca de Nicola & Li Li, 2012. "International trade, female labor, and entrepreneurship in MENA countries," Working Papers 2012-053, Federal Reserve Bank of St. Louis.
  7. repec:dgr:uvatin:2009020 is not listed on IDEAS
  8. Emami Namini, Julian, 2014. "The short and long-run impact of globalization if firms differ in factor input ratios," Journal of Economic Dynamics and Control, Elsevier, vol. 38(C), pages 37-64.
  9. repec:dgr:uvatin:2011013 is not listed on IDEAS
  10. Keiko Ito & S├ębastien Lechevalier, 2009. "The evolution of the productivity dispersion of firms: a reevaluation of its determinants in the case of Japan," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(3), pages 405-429, October.
  11. Silvio Contessi & Pierangelo De Pace, 2011. "The (non-)resiliency of foreign direct investment in the United States during the 2007-2009 financial crisis," Working Papers 2011-037, Federal Reserve Bank of St. Louis.

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