Wages, Profitability and Market Structure: Threshold Regression Analyses

This paper employs threshold regression techniques to examine the effect of product market structure on real wages and profitability. Using longitudinal data on Turkish manufacturing industries over the period of 1985-2001, we show that market concentration has positive effects on wages and profitability. The positive effect of market concentration on wages is only significant over a certain threshold level whereas, the positive effect of market concentration on profitability exists in both regimes determined by a lower threshold level of concentration but weakens over this threshold. Our results suggest that the imperfectly competitive structure of Turkish manufacturing industry offers more monopoly rent to employers than employees.