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Competition, firm size and returns to skills : evidence from currency shocks and market liberalizations

Author

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  • Michele Raitano

    (Sapienza University of Rome, Department of Economics and Law)

  • Francesco Vona

    (Ofce sciences-po,Skema Business school)

Abstract

The authors investigate the impact of exogenous product market competition shocks on returns to skills in Italy using a new longitudinal dataset on individual working histories. This impact is identified using three exogenous shocks affecting competition: the unforeseen devaluation of the Lira in 1992, its return to a fixed exchange regime in 1996 and the market liberalisation in the utility and transport sectors in the late 1990s-early 2000s. This paper extends the analysis of Guadalupe (2007) by investigating how firm heterogeneity and shocks of different types and signs affect the impact of competition on skill premia. The authors find that opposite shocks have opposite effects: an increase (resp. decrease) in international competition increases (resp. decreases) returns to skills. Moreover, international shocks have greater effects on medium-sized firms, while domestic liberalisation shocks have greater effects on large incumbents previously sheltered from any entry threat.

Suggested Citation

  • Michele Raitano & Francesco Vona, 2014. "Competition, firm size and returns to skills : evidence from currency shocks and market liberalizations," Documents de Travail de l'OFCE 2014-09, Observatoire Francais des Conjonctures Economiques (OFCE).
  • Handle: RePEc:fce:doctra:1409
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    Cited by:

    1. Raitano, Michele & Vona, Francesco, 2021. "Nepotism vs. Specific Skills: The effect of professional liberalization on returns to parental background of Italian lawyers," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 489-505.
    2. Alessia Matano & Paolo Naticchioni & Francesco Vona, 2019. "The Institutional Adjustment Margin to Import Competition: Evidence from Italian Minimum Wages," LEM Papers Series 2019/08, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Maurizio Franzini & Fabrizio Patriarca & Michele Raitano, 0. "Market competition and parental background wage premium: the role of human and relational capital," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 0, pages 1-27.
    4. Falvey, Rod & Greenaway, David & Silva, Joana, 2010. "Trade liberalisation and human capital adjustment," Journal of International Economics, Elsevier, vol. 81(2), pages 230-239, July.
    5. Maurizio Franzini & Fabrizio Patriarca & Michele Raitano, 2020. "Market competition and parental background wage premium: the role of human and relational capital," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 18(3), pages 291-317, September.

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    More about this item

    Keywords

    Skill premia; competition; currency shocks; product market regulation; firm size;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition

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