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Firm Entry Deregulation, Competition and Returns to Education and Skill

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Abstract

This paper studies the effect of firm entry deregulation on the returns to skill and education. We use matched employer-employee data for the universe of workers and firms in Portugal and exploit a comprehensive episode of entry deregulation, unique in the industrialized world, as a quasi-natural experiment to investigate how increased competition affects wages. We find that after the reform the returns to a university degree increased by around 5 percent and the returns to skills increased by around 3 percent. We include match (worker-firm) fixed effects and thus identify the effect from individuals who stay in the same firm after the reform. Results are therefore not driven by changes in employment composition, and are supportive of education and skill becoming more valuable after the reform.

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  • Ana P. Fernandes & Priscila Ferreira & L. Alan Winters, 2013. "Firm Entry Deregulation, Competition and Returns to Education and Skill," NIMA Working Papers 48, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    • Handle: RePEc:nim:nimawp:48/2013
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    Cited by:

    1. Priscila Ferreira, 2019. "Market competition and executive pay," IZA World of Labor, Institute of Labor Economics (IZA), pages 115-115, February.
    2. Cooke, Dudley & Fernandes, Ana P. & Ferreira, Priscila, 2021. "Entry deregulation, firm organization, and wage inequality," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    3. Francesco Castellaneta & Raffaele Conti & Aleksandra Kacperczyk, 2020. "The (Un) intended consequences of institutions lowering barriers to entrepreneurship: The impact on female workers," Strategic Management Journal, Wiley Blackwell, vol. 41(7), pages 1274-1304, July.
    4. Lergetporer, Philipp & Ruhose, Jens & Simon, Lisa, 2018. "Entry Barriers and the Labor Market Outcomes of Incumbent Workers: Evidence from a Deregulation Reform in the German Crafts Sector," IZA Discussion Papers 11857, Institute of Labor Economics (IZA).
    5. Ana P. Fernandes & Priscila Ferreira & L. Alan Winters, 2014. "The Effect of Competition on Managers' Compensation: Evidence From a Quasi-natural Experiment," NIMA Working Papers 57, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    6. Brand, Claus & Obstbaum, Meri & Coenen, Günter & Sondermann, David & Lydon, Reamonn & Ajevskis, Viktors & Hammermann, Felix & Angino, Siria & Hernborg, Nils & Basso, Henrique & Hertweck, Matthias & Bi, 2021. "Employment and the conduct of monetary policy in the euro area," Occasional Paper Series 275, European Central Bank.
    7. Lisa Simon, 2019. "Microeconometric Analyses on Determinants of Individual Labour Market Outcomes," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 83.
    8. Piton Céline & Rycx François, 2019. "Unemployment Impact of Product and Labor Market Regulation: Evidence from European Countries," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-32, June.
    9. Cooke, Dudley & Fernandes, Ana P. & Ferreira, Priscila, 2019. "Product market competition and gender discrimination," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 496-522.
    10. Céline Piton, 2018. "The unemployment impact of product and labour market regulation: Evidence from European countries," Working Paper Research 343, National Bank of Belgium.
    11. Fernandes, Ana P. & Ferreira, Priscila, 2021. "Executives’ gender pay gap and financing constraints," Journal of Economic Behavior & Organization, Elsevier, vol. 192(C), pages 381-404.
    12. Lena Edlund & Cecilia Machado & Maria Sviatschi, 2022. "Gentrification and the Rising Returns to Skill," Economica, London School of Economics and Political Science, vol. 89(354), pages 258-292, April.
    13. Céline Piton, 2018. "The unemployment impact of product and labour market regulation: Evidence from European countries," Working Paper Research 343, National Bank of Belgium.

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    More about this item

    Keywords

    Entry; Deregulation; Product Market Competition; Wage Structure; Returns to Education;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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