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Rising wage differential between white-collar and blue-collar workers and market concentration: The case of the USA, 1964-2007

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  • Ilhan Dogus

    (University of Hamburg)

Abstract

I suggest that market concentration at aggregate level has a significant structural impact on the wage differential between white-collar and blue-collar workers. Both phenomena are increasing as larger firms are more inclined to employ and pay more white-collar workers, in order to increase and/or maintain their market share by way of innovative tasks carried out by white-collars such as R&D, design and product differentiation, financial/capital market operations, market research, advertising and sales operations, etc. The causality from market concentration to wage differential runs through an effective demand channel and one based on the diffusion of innovations. The innovative contribution of the paper is to reveal this relationship of structural causality, and to provide a new measurement of aggregate market concentration which is calculated as the reverse of the break-even point. The argument is tested for the case of the USA between 1964 and 2007 using Vector Error Correction Model. The findings confirm the existence of a long-run positive relationship from market concentration in the nonfinancial corporate sector to the wage differential.

Suggested Citation

  • Ilhan Dogus, 2019. "Rising wage differential between white-collar and blue-collar workers and market concentration: The case of the USA, 1964-2007," PSL Quarterly Review, Economia civile, vol. 72(290), pages 223-251.
    • Handle: RePEc:psl:pslqrr:2019:34
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    Cited by:

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    3. Dögüs, Ilhan, 2021. "Production structure, output and profits - A note," ZÖSS-Discussion Papers 88, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).

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    More about this item

    Keywords

    market concentration; wage differential; white-collar and blue-collar workers;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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