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Labour Market Institutions and Wage Inequality

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  • Koeniger, Winfried

    (University of St. Gallen)

  • Leonardi, Marco

    (University of Milan)

  • Nunziata, Luca

    (University of Padova)

Abstract

In this paper we investigate the importance of labor market institutions such as unemployment insurance, unions, firing regulation and minimum wages for the evolution of wage inequality across countries. We derive a simple log-linear equation of the wage differential as a function of the institutional parameters, total factor productivity, final good prices and relative skill supply. Our estimates for 11 OECD countries imply that labor market institutions can account for a large part of the change of wage inequality across countries after controlling for time and country effects.

Suggested Citation

  • Koeniger, Winfried & Leonardi, Marco & Nunziata, Luca, 2004. "Labour Market Institutions and Wage Inequality," IZA Discussion Papers 1291, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1291
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    More about this item

    Keywords

    bilateral monopoly; wage differential by skill; labor market institutions; country panel data;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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