Jose Garcia-Louzao, Alessandro Ruggieri
The role of firms in explaining pay differentials is well documented. At the same time, there is growing evidence that market power of employers is substantial and widespread across countries. This column uses detailed Social Security data for Lithuania over two decades to bridge these two lines of evidence. The analysis suggests that wage inequality may partly emerge as a market failure: greater competition in the labour market among firms can lead to lower earnings differentials among workers. It provides suggestive evidence that the 2004 EU accession catalysed labour market competition among Lithuanian firms.
Πηγή: Voxeu