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WP202240-Market-power-and-wage-inequality.pdf
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We propose a theory of how market power affects wage inequality. We ask how goods and labor market power jointly affect the level of wages, the Skill Premium, and wage inequality. We then use detailed microdata from the US Census between 1997 and 2016 to estimate the parameters of labor supply, technology and the market structure. We find that a less competitive market structure lowers the wage level, contributes 7% to the rise in the Skill Premium and accounts for half of the increase in between-establishment wage variance.
Authors
Shubhdeep Deb
UPF Barcelona

Research Associate Pompeu Fabra University and Barcelona Graduate School of Economics
Jan is an IFS Research Associate, a Research Professor at the Barcelona School of Economics and an ICREA Research Professor at the UPF Barcelona.
Aseem Patel
University of Essex
Lawrence Warren
US Census Bureau
Working Paper details
- DOI
- 10.1920/wp.ifs.2022.4022
- Publisher
- Institute for Fiscal Studies
Suggested citation
Deb, S et al. (2022). Market power and wage inequality. 22/40. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/market-power-and-wage-inequality (accessed: 17 February 2025).
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