Deb, ShubhdeepEeckhout, JanPatel, AseemWarren, Lawrence2025-06-132025-06-132024Deb S, Eeckhout J, Patel A, Warren L. Walras-Bowley lecture: market power and wage inequality. Econometrica. 2024;92(3):603-36. DOI: 10.3982/ECTA211570012-9682http://hdl.handle.net/10230/70684We propose a theory of how market power affects wage inequality. We ask how goods and labor market power jointly determine the level of wages, the skill premium, and wage inequality. We then use detailed microdata from the U.S. Census Bureau between 1997 and 2016 to estimate the parameters of labor supply, technology, and the market structure. We find that a less competitive market structure lowers the average wage of high-skilled workers by 11.3%, and of low-skilled workers by 12.2%, contributes 8.1% to the rise in the skill premium, and accounts for 54.8% of the increase in between-establishment wage variance.application/pdfeng©2024 The Authors. Econometrica published by JohnWiley&Sons Ltd on behalf of The Econometric Society. Jan Eeckhout is the corresponding author on this paper. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.info:eu-repo/semantics/article2025-06-13http://dx.doi.org/10.3982/ECTA21157Market powerWage inequalitySkill premiumTechnological changeMarket structureEndogenous markupsEndogenous markdownsinfo:eu-repo/semantics/openAccess