The structural problem of wage or salary differentials as discussed in this article has been decomposed into four separate components: the differences in the mean wages/salaries between occupations; the differences in the standard deviations of wages/salaries between occupations; the mean wages/salaries within occupations across firms and industries; and the standard deviation across occupations within firms and industries. A fourfold typology of labor markets is suggested, and a number of hypotheses are offered as to why means and standard deviations vary. Market power is used to explain the differences among occupations across firms and industries. A typology of product markets and several hypotheses are suggested to indicate which firms and industries are more likely to have greater market power.
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