In oligopolistic industries in manufacturing the main barrier to entry is a large capital requirement in non manufacturing industries such as trucking or airlines (prior to deregulation). The principal entry barrier was the difficulty firms had in gaining regulatory permission to compete in new markets. In either case barriers to entry allow firms in concentrated or regulated industries to pay wages higher than the market level since higher labor costs can more easily be passed on in the form of higher prices without precipitating the entry of new lower cost rivals. These high wage firms will also be able to attract the best ‘quality’ workers in the labor market making efficiency wages more equal than money wages.
Whether the increased productivity of workers employed by high wage firms completely offsets their higher rates of pay has been investigated in a number of studies. While evidence has been found on both sides of this issue the most recent studies find that workers in concentrated and regulated industries do receive a wage premium that cannot be totally accounted for by higher worker productivity.
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