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Rising Concentration and Wage Inequality

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  • Cortes, Guido Matias

    (York University, Canada)

  • Tschopp, Jeanne

    (University of Bern)

Abstract

Wage inequality has risen in many countries over recent decades. At the same time, production has become increasingly concentrated in a small number of firms. In this paper, we show that these two phenomena are linked. Theoretically, we show that shocks that increase concentration will also lead to an increase in wage dispersion between firms. Empirically, we use industry-level data from 14 European countries over the period 1999-2016 and show robust evidence of a positive and statis-tically significant correlation between concentration and between-firm wage inequality, driven by increases in market shares and wages in high productivity firms.

Suggested Citation

  • Cortes, Guido Matias & Tschopp, Jeanne, 2020. "Rising Concentration and Wage Inequality," IZA Discussion Papers 13557, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp13557
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    References listed on IDEAS

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    Cited by:

    1. Bighelli, Tommaso & Di Mauro, Filippo & Melitz, Marc J. & Mertens, Matthias, 2021. "European firm concentration and aggregate productivity," IWH Discussion Papers 5/2021, Halle Institute for Economic Research (IWH).
    2. Jorge Davalos & Ekkehard Ernst, 2021. "How has labour market power evolved? Comparing labour market monopsony in Peru and the United States," Papers 2103.15183, arXiv.org.

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    More about this item

    Keywords

    heterogeneous firms; market power; wage inequality; Europe;
    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
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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