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Competitor entry impact on jobs and wages in incumbent firms: retrospective evidence from a natural experiment

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  • Majumdar, Sumit K.

Abstract

This article, situated at the interface of competition policy and labor economics literatures, examines the relationship between new competitor entry and its impact on changes in the employment levels and wage levels of incumbent telecommunications firms. The context for examining the issue is the local exchange carriers’ territories within the US. In markets with above-average competitive entry by new firms there has been a significant response by incumbent firms in increasing employment levels by 11% relative to industry average values, and wage levels have risen by 11.8% relative to average levels. In modern technologically-dynamic sectors, characterized by network effects, the impact of deregulation, competition policy changes and market entry on changes in employment and wage levels in the incumbent firms have been positive. The idea as to whether across-the-board competition leads to job losses or impacts wages negatively in incumbent firms requires re-assessment and the data suggest that promoting entry can be a powerful policy option to generate useful economic outcomes.

Suggested Citation

  • Majumdar, Sumit K., 2015. "Competitor entry impact on jobs and wages in incumbent firms: retrospective evidence from a natural experiment," Business and Politics, Cambridge University Press, vol. 17(2), pages 291-326, August.
    • Handle: RePEc:cup:buspol:v:17:y:2015:i:02:p:291-326_00
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    Cited by:

    1. Lergetporer, Philipp & Ruhose, Jens & Simon, Lisa, 2018. "Entry Barriers and the Labor Market Outcomes of Incumbent Workers: Evidence from a Deregulation Reform in the German Crafts Sector," IZA Discussion Papers 11857, Institute of Labor Economics (IZA).
    2. Lisa Simon, 2019. "Microeconometric Analyses on Determinants of Individual Labour Market Outcomes," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 83.

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