The attempt to reduce the role of the state in the market through tax cuts, decreases in social spending, deregulation, and privatization—""neoliberalism""—took root in the United States under Ronald Reagan and in Britain under Margaret Thatcher. But why did neoliberal policies gain such...

This paper shows that increasing product market competition can have a direct impact on the employment relationship and on wage inequality. I develop a simple model in which an increase in product market competition increases returns to skill through the effect of competition on the sensitivity...