The Wage Premium and Market Structure

25 Pages Posted: 25 Sep 2019 Last revised: 27 Sep 2019

See all articles by Ruohan Wu

Ruohan Wu

University of North Georgia

Meng-Fen Yen

National Taiwan University - Department of Finance

Mario Miranda

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics

Date Written: September 16, 2019

Abstract

In this paper, we seek to understand why the “wage premium”, the percentage by which wages earned by skilled workers exceed those of unskilled workers, varies among industries featuring different market competitiveness. We construct a theoretical model with CES utility function and constant return to scale production function that allows us to examine the effects of different imperfect market structures (monopolistic competition and oligopoly) on the wage premium. We find that the wage premium is higher under oligopoly than under monopolistic competition. Our findings are supported by empirical evidence from Chilean manufacturers.

Keywords: Market structure; oligopoly; monopolistic competition; relative factor endowment; wage premium

Suggested Citation

Wu, Ruohan and Yen, Meng-Fen and Miranda, Mario, The Wage Premium and Market Structure (September 16, 2019). Available at SSRN: https://ssrn.com/abstract=3454861 or http://dx.doi.org/10.2139/ssrn.3454861

Ruohan Wu (Contact Author)

University of North Georgia ( email )

82 College Cir
Dahlonega, GA 30597
United States

Meng-Fen Yen

National Taiwan University - Department of Finance

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

Mario Miranda

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics ( email )

2120 Fyffe Rd
Columbus, OH 43210-1067
United States

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