Horizontal Mergers and Wage Inequality

This paper incorporates horizontal mergers into the general-equilibrium frame-work embedded with game theory and separately analyzes how horizontal mergers in the skilled sector and the unskilled sector influence the skilled-unskilled wage inequality. In an economy with full employment, a horizontal merger in the skilled sector will certainly reduce the wage gap. In an economy with unemployment, a horizontal merger in the skilled sector will conditionally expand the wage inequality. Whether in an economy with full employment or in an economy with unemployment, a horizontal merger in the unskilled sector will conditionally widen the wage gap.