Wages, unions, insiders and product market power

This paper analyses time series data on some 800 British manufacturing companies to address various questions concerning the role of insiders and market power in wage determination. The following are the important results. First, firm specific factors such as productivity gains do influence wage increases. Second, there is no robust evidence of insider power at wok in wage setting. Third, conditions in the external labour market are a very important influence on company wages, although less so for firms with a high degree of market power. Finally, product market power itself has a positive impact on wages, which is enhanced in large firms but is not influenced by union status.