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Industry Concentration and Wage Inequality: a Directed Technical Change Approach

Author

Listed:
  • Manuela Magalhães

    (Universidade Portucalense, Porto and CEFAGE-UBI)

  • Tiago Sequeira

    (Universidade da Beira Interior)

  • Óscar Afonso

    (Universidade do Porto)

Abstract

Despite several theoretical approaches linking rising market power to more income inequality, a theoretical-based empirical quantification of this relationship has not been made. We devised a directed technical change model and characterize this relationship. To test our model, we calculate concentration indexes and relate them with skill-premium using industry data per country for 40 countries from 1995 to 2011. In general, we show a negative and robust relationship between the market power index and wage inequality. Additional evidence shows that results tend to be different for countries with different income levels and for different initial values of skill-premium and market power.

Suggested Citation

  • Manuela Magalhães & Tiago Sequeira & Óscar Afonso, 2019. "Industry Concentration and Wage Inequality: a Directed Technical Change Approach," Open Economies Review, Springer, vol. 30(3), pages 457-481, July.
    • Handle: RePEc:kap:openec:v:30:y:2019:i:3:d:10.1007_s11079-018-9513-0
    DOI: 10.1007/s11079-018-9513-0
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    More about this item

    Keywords

    Market power; Industrial concentration; Skill-premium; Inequality; Input-output matrices;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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