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Rising Concentration and Wage Inequality

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  • Guido Matias Cortes
  • Jeanne Tschopp

Abstract

Wage inequality has risen in many countries over recent decades. At the same time, production has become increasingly concentrated in superstar firms. In this paper, we show that these two phenomena are linked. Theoretically, we show that shocks that increase concentration, such as an increase in consumers price sensitivity, 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 statistically significant correlation between concentration and the dispersion of firm-level wages.

Suggested Citation

  • Guido Matias Cortes & Jeanne Tschopp, 2020. "Rising Concentration and Wage Inequality," Diskussionsschriften dp2001, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp2001
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Tommaso Bighelli & Filippo di Mauro & Marc J Melitz & Matthias Mertens, 2023. "European Firm Concentration and Aggregate Productivity," Journal of the European Economic Association, European Economic Association, vol. 21(2), pages 455-483.
    3. Cortes, Matias & Lerche, Adrian & Schönberg, Uta & Tschopp, Jeanne, 2023. "Technological Change, Firm Heterogeneity and Wage Inequality," IZA Discussion Papers 16070, Institute of Labor Economics (IZA).
    4. Anders Akerman, 2024. "Market concentration and the relative demand for college‐educated labour," Economica, London School of Economics and Political Science, vol. 91(361), pages 292-319, January.
    5. Yannick Bormans & Angelos Theodorakopoulos, 2023. "Productivity dispersion, wage dispersion and superstar firms," Economica, London School of Economics and Political Science, vol. 90(360), pages 1145-1172, October.

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    More about this item

    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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