Competition, Firm Size and Returns to Skills: Evidence from Currency Shocks and Market Liberalisations

28 Pages Posted: 7 Dec 2017

Date Written: December 2017

Abstract

We investigate the impact of product market competition on returns to skills in Italy using a longitudinal dataset on individual working histories. This impact is identified using three exogenous shocks affecting competition: the unforeseen devaluation of the Lira in 1992, its return to a fixed exchange regime in 1996 and the market liberalisation in the utility and transport sectors in the late 1990s–early 2000s. We analyse how firm heterogeneity and shocks of different types and signs affect the impact of competition on skill premia. We find that opposite shocks have opposite effects: an increase (resp. decrease) in international competition increases (resp. decreases) skill premia. Moreover, international shocks have greater effects on medium sized firms, while domestic liberalisation shocks have greater effects on large incumbents.

Keywords: competition, currency shocks, firm size, product market regulation, skill premia

Suggested Citation

Raitano, Michele, Competition, Firm Size and Returns to Skills: Evidence from Currency Shocks and Market Liberalisations (December 2017). The World Economy, Vol. 40, Issue 12, pp. 2676-2703, 2017, Available at SSRN: https://ssrn.com/abstract=3083233 or http://dx.doi.org/10.1111/twec.12491

Michele Raitano (Contact Author)

Sapienza University of Rome ( email )

Via del Castro Laurenziano 9
Roma, Rome 00161
Italy

HOME PAGE: http://https://sites.google.com/a/uniroma1.it/micheleraitano-eng/

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