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Fixed cost, number of firms, and skill premium: An alternative source for rising wage inequality

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  • Kurokawa, Yoshinori

Abstract

The number of firms and the wage inequality increased in U.S. manufacturing industries after the Carter/Reagan deregulation was implemented. By extending a variety model, this paper provides a possible theoretical explanation for this observation on the basis of fixed cost.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 108 (2010)
Issue (Month): 2 (August)
Pages: 141-144

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Handle: RePEc:eee:ecolet:v:108:y:2010:i:2:p:141-144

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Web page: http://www.elsevier.com/locate/ecolet

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Keywords: Entry deregulation Fixed cost Number of firms Skill premium Variety-skill complementarity Firm size;

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References

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  1. Markus Mobius & Raphael Schoenle, 2006. "The Evolution of Work," NBER Working Papers 12694, National Bureau of Economic Research, Inc.
  2. Matthew F. Mitchell, 2005. "Specialization And The Skill Premium In The 20th Century," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 935-955, 08.
  3. Ebell, Monique & Haefke, Christian, 2006. "Product Market Deregulation and the U.S. Employment Miracle," IZA Discussion Papers 1946, Institute for the Study of Labor (IZA).
  4. Djankov, Simeon & La Porta, Rafael & López-de-Silanes, Florencio & Shleifer, Andrei, 2001. "The Regulation of Entry," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2953, C.E.P.R. Discussion Papers.
  5. Thomas J. Holmes & Matthew F. Mitchell, 2008. "A theory of factor allocation and plant size," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 329-351.
  6. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  7. Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc.
  8. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
  9. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, American Economic Association, vol. 67(3), pages 297-308, June.
  10. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, American Economic Association, vol. 72(3), pages 389-405, June.
  11. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(5), pages 1027-59, October.
  12. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report, Federal Reserve Bank of Minneapolis 239, Federal Reserve Bank of Minneapolis.
  13. Boeri, Tito & Nicoletti, Giuseppe & Scarpetta, Stefano, 2000. "Regulation And Labour Market Performance," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2420, C.E.P.R. Discussion Papers.
  14. Zhu, Susan Chun & Trefler, Daniel, 2005. "Trade and inequality in developing countries: a general equilibrium analysis," Journal of International Economics, Elsevier, Elsevier, vol. 65(1), pages 21-48, January.
  15. Dinopoulos, Elias & Segerstrom, Paul, 1996. "A Schumpeterian Model of Protection and Relative Wages," Working Paper Series, Research Institute of Industrial Economics 471, Research Institute of Industrial Economics.
  16. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(2), pages 367-97, May.
  17. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Department of Economics, California Davis - Department of Economics 95-14, California Davis - Department of Economics.
  18. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, Elsevier, vol. 9(4), pages 469-479, November.
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Citations

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Cited by:
  1. Zhang, Jingjing, 2012. "Inflow of labour, producer services and wage inequality," Economics Letters, Elsevier, Elsevier, vol. 117(3), pages 600-603.
  2. Manoj Atolia & Yoshinori Kurokawa, 2014. "Fixed Costs, Task Variety, and Skill Flexibility: A Simple Unified Theory of Below and Within-top Inequality," Tsukuba Economics Working Papers, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba 2014-001, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba.
  3. Yoshinori Kurokawa, 2014. "A Simple Model of Competition Policies, Trade, and the Skill Premium," Tsukuba Economics Working Papers, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba 2014-002, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba.

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