WAGES AND PRODUCT MARKET POWER

This paper analyses time-series on some 800 British manufacturing comp anies to address various questions concerning the role of insiders and market power in wage determination. The following are the most import ant results. First, product market power has a positive impact on wage s; this impact is enhanced in large firms but is not influenced by uni on status. Second, while firm-specific factors influence wages, the si ze of these effects is not influenced by union status, firm size or pr oduct market power; however, product market power reduces the generall y strong negative effect of unemployment on wages. Finally, there is n o robust evidence of insider power at work in wage-setting irrespectiv e of product market position.