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The Effect of Competition on Wages and Productivity: Evidence from the UK

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  • George Symeonidis

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Abstract

This paper examines the impact of competition on wages and productivity using a panel data set of UK manufacturing industries over 1954-1973. The introduction of cartel law in the UK in the late 1950s caused an intensification of price competition in previously cartelized manufacturing industries, but it did not affect those industries which were not cartelized. The econometric results from a comparison of the two groups of industries before and after the introduction of cartel law provide strong evidence of a negative effect of collusion on labour productivity growth. There is no evidence of any effect of collusion on wages. These results are robust to controlling for the potential endogeneity of collusion and are further strengthened by a comparison with US data.

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Bibliographic Info

Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 626.

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Date of creation: 02 Mar 2007
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Handle: RePEc:esx:essedp:626

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  1. Nickell, S & Vainiomaki, J & Wadhwani, S, 1994. "Wages and Product Market Power," Economica, London School of Economics and Political Science, vol. 61(244), pages 457-73, November.
  2. Symeonidis, George, 2000. "Price Competition, Non-price Competition and the Market Structure: Theory and Evidence from the UK," Economica, London School of Economics and Political Science, vol. 67(267), pages 437-56, August.
  3. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August.
  4. S Broadberry & Nicholas Crafts, 1996. "British Economic Policy and Industrial Performance in the Early Post-War Period," CEP Discussion Papers dp0292, Centre for Economic Performance, LSE.
  5. José E. Galdón-Sánchez & James A. Schmitz Jr., 2002. "Competitive Pressure and Labor Productivity: World Iron-Ore Markets in the 1980's," American Economic Review, American Economic Association, vol. 92(4), pages 1222-1235, September.
  6. Nicoletti, Giuseppe & Scarpetta, Stefano, 2003. "Regulation, productivity, and growth : OECD evidence," Policy Research Working Paper Series 2944, The World Bank.
  7. Hay, Donald A & Liu, Guy S, 1997. "The Efficiency of Firms: What Difference Does Competition Make?," Economic Journal, Royal Economic Society, vol. 107(442), pages 597-617, May.
  8. Djankov, Simeon & Murrell, Peter, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," CEPR Discussion Papers 3319, C.E.P.R. Discussion Papers.
  9. Bottasso, Anna & Sembenelli, Alessandro, 2001. "Market power, productivity and the EU Single Market Program: Evidence from a panel of Italian firms," European Economic Review, Elsevier, vol. 45(1), pages 167-186, January.
  10. Galeotti,Gianluigi & Salmon,Pierre & Wintrobe,Ronald (ed.), 2000. "Competition and Structure," Cambridge Books, Cambridge University Press, number 9780521771337, October.
  11. repec:sae:niesru:v:97:y:1981:i:1:p:83-83 is not listed on IDEAS
  12. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
  13. James A. Schmitz Jr., 2005. "What Determines Productivity? Lessons from the Dramatic Recovery of the U.S. and Canadian Iron Ore Industries Following Their Early 1980s Crisis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 582-625, June.
  14. Oulton,Nicholas & O'Mahony,Mary, 1994. "Productivity and Growth," Cambridge Books, Cambridge University Press, number 9780521453455, October.
  15. Rachel Griffith, 2001. "Product market competition, efficiency and agency costs: an empirical analysis," IFS Working Papers W01/12, Institute for Fiscal Studies.
  16. Symeonidis, George, 1999. "Price Competition and Market Structure: The Impact of Cartel Policy on Concentration in the UK," CEPR Discussion Papers 2308, C.E.P.R. Discussion Papers.
  17. George Symeonidis, 2003. "In Which Industries is Collusion More Likely? Evidence from the UK," Journal of Industrial Economics, Wiley Blackwell, vol. 51(1), pages 45-74, 03.
  18. Tybout, James R. & Westbrook, M. Daniel, 1995. "Trade liberalization and the dimensions of efficiency change in Mexican manufacturing industries," Journal of International Economics, Elsevier, vol. 39(1-2), pages 53-78, August.
  19. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Restructuring and productivity growth in uk manufacturing," Economic Journal, Royal Economic Society, vol. 113(489), pages 666-694, 07.
  20. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  21. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
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Citations

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Cited by:
  1. George Symeonidis, 2008. "Downstream Competition, Bargaining, and Welfare," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(1), pages 247-270, 03.
  2. repec:cge:warwcg:42 is not listed on IDEAS
  3. Crafts, Nicholas, 2011. "British Relative Economic Decline Revisited," CEPR Discussion Papers 8384, C.E.P.R. Discussion Papers.
  4. Charles Bérubé & Marc Duhamel & Daniel Ershov, 2012. "Market Incentives for Business Innovation: Results from Canada," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 47-65, March.
  5. Shawn Klimek & James Schmitz & Timothy Dunne, 2010. "Does Foreign Competition Spur Productivity? Evidence From Post WWII U.S. Cement Manufacturing," 2010 Meeting Papers 805, Society for Economic Dynamics.

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