Rising wage dispersion between white-collar and blue-collar workers and market concentration: The case of the USA, 1966-2011

In this paper, I address the simple question "What types of employees have been steadily paid more by what type of employers?" and I suggest that rising market concentration has a significant structural impact on the wage differentials between white and blue-collar workers. The innovative contribution of this paper is to reveal this relationship of structural causality, which has been hitherto absent from the literature. The argument is tested via fred.stlouisfed annual datasets for the USA between 1966 and 2011 using Vector Autoregressive Model. The findings show that the responses of wage dispersion to one-unit shock in market concentration are positive and significant over a period of 10 years. Furthermore, 18% of variations in wage dispersion in the short-run and 30% of variations in the long-run are explained by market concentration.