Explaining the Link Between Market Power and Income Shares
Explain why a decrease in the level of competition in an economy's product markets tends to lead to a lower share of total income going to workers' wages. In your explanation, describe the mechanism through which firms' pricing decisions are affected.
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Introduction to Macroeconomics Course
Ch.1 The supply side of the macroeconomy: Unemployment and real wages - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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Analysis in Bloom's Taxonomy
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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