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A Simple Model of Competition Policies, Trade, and the Skill Premium

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  • Yoshinori Kurokawa

Abstract

We develop a simple model of competition policies and trade, where fixed costs are shared within a cartel. The closed economy model shows that entry deregulation can increase the skill premium by increasing firm numbers and decreasing firm size, while an antitrust policy has the opposite effects. The numerical example with two asymmetric countries shows that entry deregulation and antitrust policy in one country, respectively, can increase and decrease the skill premia in both countries; however, the domestic skill premium is changed by a greater percentage than the foreign one. Available U.S. data show that our model seems empirically relevant.

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  • Yoshinori Kurokawa, 2014. "A Simple Model of Competition Policies, Trade, and the Skill Premium," Tsukuba Economics Working Papers 2014-002, Faculty of Humanities and Social Sciences, University of Tsukuba, revised Apr 2020.
    • Handle: RePEc:tsu:tewpjp:2014-002
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    References listed on IDEAS

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