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Why Has Wage Inequality Risen Most Where Wage Shares Have Fallen Least?

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  • Declan Trott

Abstract

Most developed countries have experienced rising wage inequality and falling wage shares, which are often blamed on the same forces - globalisation, technical change, and weakening labour market institutions. This paper shows, however, that wage inequality has risen the most in those countries where wage shares have fallen the least, and vice-versa. It is difficult to plausibly account for this pattern using a range of proxies for the above and other suggested explanations. Excluding the top 1% of incomes from the wage share makes little difference to the results

Suggested Citation

  • Declan Trott, 2013. "Why Has Wage Inequality Risen Most Where Wage Shares Have Fallen Least?," CEPR Discussion Papers 685, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    • Handle: RePEc:auu:dpaper:685
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    File URL: https://www.cbe.anu.edu.au/researchpapers/CEPR/DP685.pdf
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    References listed on IDEAS

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    Cited by:

    1. Declan Trott & Leo Vance, 2018. "Adjusting the Australian Labour Share for Depreciation, Housing and Other Factors, 1960–2016," Economic Papers, The Economic Society of Australia, vol. 37(4), pages 412-428, December.

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    More about this item

    Keywords

    wage inequality; wage share; labour share; bottom 99%;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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