The effect of competition on the intra-industry dispersion of earnings

Although several studies have examined the link between competition and average earnings and others have focussed on the magnitude and determinants of establishment wage differentials, very little is known about the effect of competition on the intra-industry dispersion of earnings. Using a comprehensive data set on the incidence of price-fixing across British manufacturing industries in the 1950s, I compare collusive and competitive industries and find strong evidence of a negative effect of collusion on the intra-industry dispersion of plant average earnings. This result is robust to controlling for the potential endogeneity of collusion