Rising Concentration and Wage Inequality

33 Pages Posted: 4 Aug 2020

See all articles by Guido Matias Cortes

Guido Matias Cortes

York University

Jeanne Tschopp

University of Bern - Department of Economics

Abstract

Wage inequality has risen in many countries over recent decades. At the same time, production has become increasingly concentrated in a small number of firms. In this paper, we show that these two phenomena are linked. Theoretically, we show that shocks that increase concentration will also lead to an increase in wage dispersion between firms. Empirically, we use industry-level data from 14 European countries over the period 1999-2016 and show robust evidence of a positive and statis-tically significant correlation between concentration and between-firm wage inequality, driven by increases in market shares and wages in high productivity firms.

Keywords: wage inequality, market power, heterogeneous firms, Europe

JEL Classification: J31, L11, E24

Suggested Citation

Cortes, Guido Matias and Tschopp, Jeanne, Rising Concentration and Wage Inequality. Available at SSRN: https://ssrn.com/abstract=3665117 or http://dx.doi.org/10.2139/ssrn.3665117

Guido Matias Cortes (Contact Author)

York University ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Jeanne Tschopp

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

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