Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 264: Market Imperfections and Wage Inequality
Klas Sandén ()
Additional contact information
Klas Sandén: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Abstract: This paper investigates the relationship between various market imperfections and the skill premium. The model in this paper assumes perfectly competitive labor markets but distorted product and financial markets. The model predicts that the skill premium is positively correlated with market power, modeled using preference for variety, and shorter product cycles. The effect from financial market distortions or taxes on financial income is ambiguous. Positive external effects among firms developing new goods decrease the skill premium.
Keywords: Wage Inequality; Monopolistic Competition; Innovation
JEL-codes: D33; D43; D50; D91; D92; J31; L13; O31
31 pages, September 10, 2007
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