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Market Imperfections and Wage Inequality

Author

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  • Sandén, Klas

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

This paper investigates the relationship between various market imperfections and the skill premium. The model in this paper assumes perfectly competitive labor markets but distorted product and financial markets. The model predicts that the skill premium is positively correlated with market power, modeled using preference for variety, and shorter product cycles. The effect from financial market distortions or taxes on financial income is ambiguous. Positive external effects among firms developing new goods decrease the skill premium.

Suggested Citation

  • Sandén, Klas, 2007. "Market Imperfections and Wage Inequality," Working Papers in Economics 264, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0264
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    File URL: http://hdl.handle.net/2077/4755
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    References listed on IDEAS

    as
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    3. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
    4. Mendez, Rodrigue, 2002. "Creative Destruction and the Rise of Inequality," Journal of Economic Growth, Springer, vol. 7(3), pages 259-281, September.
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    7. Michael C. Burda & Barbara Dluhosch, 2002. "Cost Competition, Fragmentation, and Globalization," Review of International Economics, Wiley Blackwell, vol. 10(3), pages 424-441, August.
    8. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
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    More about this item

    Keywords

    Wage Inequality; Monopolistic Competition; Innovation;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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