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The Effect of Competition on Wages and Productivity: Evidence from the United Kingdom

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  • George Symeonidis

    (University of Essex)

Abstract

I examine the impact of competition on wages and productivity using a panel data set of U.K. manufacturing industries over 1954-1973. The introduction of cartel law in the United Kingdom in the late 1950s caused an intensification of price competition in previously cartelized manufacturing industries, but it did not affect those industries that were not cartelized. The econometric results from a comparison of the two groups of industries before and after the introduction of cartel law provide strong evidence of a negative effect of collusion on labor productivity growth. There is no evidence of any effect of collusion on wages. These results are robust to controlling for the potential endogeneity of collusion and are further strengthened by a comparison with U.S. data. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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  • George Symeonidis, 2008. "The Effect of Competition on Wages and Productivity: Evidence from the United Kingdom," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 134-146, February.
    • Handle: RePEc:tpr:restat:v:90:y:2008:i:1:p:134-146
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    Cited by:

    1. Michael L. Polemis, 2020. "A note on the estimation of competition-productivity nexus: a panel quantile approach," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 47(4), pages 663-676, December.
    2. Liu, Li & Altshuler, Rosanne, 2013. "Measuring the Burden of the Corporate Income Tax Under Imperfect Competition," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(1), pages 215-237, March.
    3. Polemis, Michael L. & Stengos, Thanasis, 2015. "Does market structure affect labour productivity and wages? Evidence from a smooth coefficient semiparametric panel model," Economics Letters, Elsevier, vol. 137(C), pages 182-186.
    4. Crafts, Nicholas, 2017. "The Postwar British Productivity Failure," Economic Research Papers 269090, University of Warwick - Department of Economics.
    5. Flavien Moreau & Ludovic Panon, 2019. "Macroeconomic Effects of Market Structure Distortions," 2019 Meeting Papers 579, Society for Economic Dynamics.
    6. John Davies, 2018. "‘Outcome’ Assessment: What Exactly Are We Measuring? A Personal Reflection on Measuring the Outcomes from Competition Agencies’ Interventions," De Economist, Springer, vol. 166(1), pages 7-22, March.
    7. Symeonidis, George, 2018. "Collusion, profitability and welfare: Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 530-545.
    8. Crafts, Nicholas, 2011. "British Relative Economic Decline Revisited," CEPR Discussion Papers 8384, C.E.P.R. Discussion Papers.
    9. George Symeonidis, 2011. "Competition and the relative productivity of large and small firms," Applied Economics, Taylor & Francis Journals, vol. 43(24), pages 3253-3264.
    10. Thomas J. Holmes & David K. Levine & James A. Schmitz, 2012. "Monopoly and the Incentive to Innovate When Adoption Involves Switchover Disruptions," American Economic Journal: Microeconomics, American Economic Association, vol. 4(3), pages 1-33, August.
    11. Levenstein, Margaret C. & Sivadasan, Jagadeesh & Suslow, Valerie Y., 2015. "The effect of competition on trade: Evidence from the collapse of international cartels," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 56-70.
    12. World Bank & Organisation for Economic Co-operation and Development, 2017. "A Step Ahead," World Bank Publications - Books, The World Bank Group, number 27527.
    13. Lilian T.D. Petit & Ron G.M. Kemp & Jarig van Sinderen, 2015. "Cartels And Productivity Growth: An Empirical Investigation Of The Impact Of Cartels On Productivity In The Netherlands," Journal of Competition Law and Economics, Oxford University Press, vol. 11(2), pages 501-525.
    14. Crafts, Nicholas, 2012. "Creating Competitive Advantage: Policy Lessons from History," CAGE Online Working Paper Series 91, Competitive Advantage in the Global Economy (CAGE).
    15. Crafts, Nicholas & O’Rourke, Kevin Hjortshøj, 2014. "Twentieth Century Growth*This research has received funding from the European Research Council under the European Union’s Seventh Framework Programme (FP7/2007-2013) / ERC grant agreement no. 249546.," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 263-346, Elsevier.
    16. Crafts, Nicholas, 2012. "British relative economic decline revisited: The role of competition," Explorations in Economic History, Elsevier, vol. 49(1), pages 17-29.
    17. Symeonidis, George, 2017. "Does product market competition increase strike activity? Evidence from the UK," European Economic Review, Elsevier, vol. 97(C), pages 42-56.
    18. Nicholas Crafts, 2021. "What can we learn from the United Kingdom’s post‐1945 economic reforms?," Economic Affairs, Wiley Blackwell, vol. 41(3), pages 354-376, October.
    19. George Symeonidis, 2024. "Unprofitable Cartels: Evidence from a Natural Experiment in the UK," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(3), pages 421-447, May.
    20. Crafts, Nicholas & Toniolo, Gianni, 2008. "European Economic Growth, 1950-2005: An Overview," CEPR Discussion Papers 6863, C.E.P.R. Discussion Papers.
    21. John E. Tilton, 2013. "Cyclical and Secular Determinants of Productivity in the Copper, Aluminum, Iron Ore, and Coal Industries," Working Papers 2013-11, Colorado School of Mines, Division of Economics and Business.
    22. Broadberry, Stephen & Crafts, Nicholas, 2010. "Openness, Protectionism And Britain’S Productivity Performance Over The Long-Run," CAGE Online Working Paper Series 36, Competitive Advantage in the Global Economy (CAGE).
    23. Nicholas Crafts, 2013. "Returning to growth: lessons from the 1930s," Working Papers 13010, Economic History Society.

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