%0 Report
        %A Guadalupe, Maria
        %T Product Market Competition, Returns to Skill and Wage Inequality
        %D 2005
        %8 2005 Apr
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 1556
        %U https://www.iza.org/publications/dp1556
        %X This paper shows that increasing product market competition can have a direct impact on the employment relationship and on wage inequality. I develop a simple model in which an increase in product market competition increases returns to skill through the effect of competition on the sensitivity of profits to cost reductions. I then show empirically that relative wages increase with competition using a large panel of United Kingdom workers with complete work histories. I identify the impact of competition on returns to skill in the panel, using two exogenous measures of competition provided by two quasi-natural experiments. Quantile regressions indicate that increased competition also raised returns to unobserved ability.
        %K product market competition
%K returns to skill
%K wage structure