Market Power & Within-Firm Inequality

Kazakis, Pantelis (2022): Market Power & Within-Firm Inequality.

Abstract

Income inequality in the United States is on the rise. At the same time, firm market power has also increased. In this paper, I attempt to shed light on the relation between these two variables. Using data for U.S. firms I find a positive relation between market power and top executive pay. I also find that market power is positively associated with executive wage-to-employee wage ratios, potentially indicating that market power is a force that increases within-firm inequality

• Item Type: MPRA Paper
• Language: English
• Keywords: within-firm inequality, CEO & executive pay, firm markups, competition
• Subjects: J - Labor and Demographic Economics > J2 - Demand and Supply of Labor; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages ; Payment Methods; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance

References

Acemoglu, D., & Autor, D. (2011). Skills, tasks and technologies: Implications for employment and earnings. In Handbook of labor economics (Vol. 4, pp. 1043-1171). Elsevier.

Azar, J., Marinescu, I., Steinbaum, M., & Taska, B. (2020). Concentration in US labor markets: Evidence from online vacancy data. Labour Economics, 66, 101886.

Azar, J., Marinescu, I., & Steinbaum, M. (2022). Labor market concentration. Journal of Human Resources, 57(S), S167-S199.

Bao, R., De Loecker, J., & Eeckhout, J. (2022). Are managers paid for market power? (No. w29918). National Bureau of Economic Research.

De Loecker, J., Eeckhout, J., & Unger, G. (2020). The rise of market power and the macroeconomic implications. The Quarterly Journal of Economics, 135(2), 561-644.

Gabaix, X., & Landier, A. (2008). Why has CEO pay increased so much?. The Quarterly Journal of Economics, 123(1), 49-100.

Han, M., & Pyun, J. H. (2021). Markups and income inequality: Causal links, 1975-2011. Journal of Comparative Economics, 49(2), 290-312.

İmrohoroğlu, A., & Tüzel, Ş. (2014). Firm-level productivity, risk, and return. Management Science, 60(8), 2073-2090.

Kaplan, G., & Zoch, P. (2020). Markups, labor market inequality and the nature of work (No. w26800). National Bureau of Economic Research.

Song, J., Price, D. J., Guvenen, F., Bloom, N., & Von Wachter, T. (2019). Firming up inequality. The Quarterly journal of economics, 134(1), 1-50.