Foreign Competition, Market Power, and Wage Inequality

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Abstract
This paper investigates the link between the trend in the returns to education and foreign competition in concentrated industries. We argue that the impact of foreign competition on the relative wages of less skilled workers depends on the market structure of the industry penetrated. The empirical evidence indicates that employment changes in a small group of trade-impacted concentrated industries can explain not only part of the aggregate rise in wage inequality in the United States, but also some of the differences in the trends in wage inequality across metropolitan areas.

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