Market Imperfections and Wage Inequality
This paper investigates the relationship between various market imperfections and the skill premium. The model in this paper assumes perfectly competitive labor markets but distorted product and financial markets. The model predicts that the skill premium is positively correlated with market power, modeled using preference for variety, and shorter product cycles. The effect from financial market distortions or taxes on financial income is ambiguous. Positive external effects among firms developing new goods decrease the skill premium.
|Date of creation:||10 Sep 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden|
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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