Market power and income disparities: How can firms influence the gap between capital and labor earnings

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Abstract

This paper investigates the effects of market power on income disparities when firm‐specific parameters are considered to test how they shape the gap between capital and labor earnings through their pricing decisions. The dataset consists of 2895 UK manufacturing and services firms over 2010–2019. The results provide the following insights: (a) There is a strong positive association between market power and income disparities across the market, (b) liquidity constraints exert a positive effect on the asset‐based disparities ratio, but a negative effect on the profit‐based ratio. The robustness of the results is also checked when market‐specific characteristics are included in the process.
Original languageEnglish
Article number12450
Pages (from-to)1-28
Number of pages28
JournalBulletin of Economic Research
Early online date16 May 2024
DOIs
Publication statusE-pub ahead of print - 16 May 2024

Keywords

  • income disparities
  • markup ratio
  • panel data
  • liquidity constraints
  • firms

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