Market Power and Wage Inflation: A Further Analysis

Abstract

age, changes in money wage rates of firms in monopolistic markets are no greater than changes in money wage rates of firms in competitive markets. The purpose of this paper is to demonstrate through a further analysis of the same data that, on the contrary, market power probably does foster wage inflation, but in a way that is consistent with Hamermesh's regression results. Moreover, we shall attempt to show that market power fosters wage inflation despite our acceptance of two axiomatic assumptions which seemingly preclude such an effect: a) monopolists do not optimize by perpetually raising their prices relative to other