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Migration and Increasing Wage Inequality: Can Imperfect Competition Explain the Link?

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Abstract

In this paper, we test two hypotheses as regarding potential effects of domestic and international migration on wage inequality. One related to the possibility of wage competition, and another alternative hypothesis related to fixed set-up costs and indivisibilities for different types of industries within the local labour market. Using detailed information on Swedish local labour markets, derived from Swedish full population data, for 1993 and 2003, a panel model of percent changes in inequality is estimated. Thereby controlling for local level fixed effects as well as other competing explanations, the results suggest that positive net migration may affect income dispersion regardless of possible negative wage competition.

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  • Korpi, Martin, 2013. "Migration and Increasing Wage Inequality: Can Imperfect Competition Explain the Link?," Ratio Working Papers 219, The Ratio Institute.
  • Handle: RePEc:hhs:ratioi:0219
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    More about this item

    Keywords

    Income inequality; local labour markets; business diversification; international migration;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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