Consider an economy where a series of policy changes leads to a substantial reduction in the level of competition in both the product market (e.g., weaker antitrust laws) and the labor market (e.g., restrictions on unionization). Based on the relationship between market structure and income distribution, what is the most probable outcome?
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Impact of Market Competition on Income Distribution
Consider an economy where a series of policy changes leads to a substantial reduction in the level of competition in both the product market (e.g., weaker antitrust laws) and the labor market (e.g., restrictions on unionization). Based on the relationship between market structure and income distribution, what is the most probable outcome?
A government policy that successfully breaks up monopolies and increases the number of competing firms in an industry would be expected to decrease the share of income paid to labor.
Explaining the Link Between Market Power and Income Shares