The Effects of Changes in a Firms Product Market Power on Wages

Using firm-level panel data, this paper argues that increases in a firm's market share or a rise in the industry concentration ratio both serve to increase wages. On these estimates, actual changes in the 'product market power' variables could have generated a wage gap of up to 13.5 per cent over the period 1976-82. These results are consistent with various rent-sharing hypotheses, although these is some evidence that the extent of rent-sharing is greater in union firms.