ARTICLE: PRODUCT MARKETS AND PAYCHECKS: DEREGULATION'S EFFECT ON THE COMPENSATION STRUCTURE IN BANKING Skip over navigation
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Copyright (c) 2007 Cornell University
Industrial & Labor Relations Review

ARTICLE: PRODUCT MARKETS AND PAYCHECKS: DEREGULATION'S EFFECT ON THE COMPENSATION STRUCTURE IN BANKING

January, 2007

60 Ind. & Lab. Rel. Rev. 246

Author

ABIGAIL K. WOZNIAK *

Excerpt

Markets for a range of goods and services have become more competitive in recent decades as governments dismantle industry-specific regulations and as increasing numbers of firms compete to sell their goods internationally. These forces have had predictable effects on goods prices and availability, but their effects on labor market outcomes for workers who produce for these markets are less well known. This paper examines the effects of increased competitiveness in an industry's product market on the compensation structure for the affected industry's employees. To identify effects of increased competition with changes in an industry's compensation structure, I take advantage of state-level changes to laws regulating entry into the commercial banking industry. The repeal of these laws lowered barriers to entry and reduced restrictions on scale, leading to a more competitive environment for a state's banking firms.

In contrast to its effects on good markets, effects of product market liberalization on labor market outcomes are difficult to predict. First, these effects will generally depend on conditions of wage setting under the regulatory regime, and therefore predictions do not necessarily generalize from one industry setting to another. Additionally, liberalization may operate on worker compensation through a number of direct and indirect channels, which in turn may also differ across industries. Despite the numerous changes in worker compensation that liberalization might effect, few studies have undertaken an exhaustive review of the compensation structure changes actually associated with industry deregulation. Among those that have, the focus has generally been on unionized, capital-intensive ...
 
 
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