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Wage Inequalities and Low Pay: The Role of Labour Market Institutions

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  • Claudio Lucifora

    (Political Sciences Department, University of Palermo)

Abstract

In this study, we investigate the role that some institutional features play in shaping the distribution of wages across a number of OECD countries. While considerable attention has been devoted in recent years to the evolution of earnings inequality and to the analysis of the competing explanations for the observed phenomena, also the existence (and persistence) of considerable structural differences - across countries - in the level of wage inequality and the incidence of low pay can shed some light on a different dimension of inequality patterns. In particular, we focus on three specific features: the effects of trade unions, the structure of collective bargaining and the existence of regulations on wages. By looking at the different moments of the distribution of earnings various dimensions of low pay have been analysed, namely the effects of the institutional setting on the mean, the dispersion and the (time) covariance of earnings. Consistent with previous work, our results suggest that institutions are a relevant factor in shaping the distribution of earnings and the incidence of low pay. We show that institutional settings differ substantially across countries and that institutional variety in the labour market is able to explain a great deal of the observed patterns in low pay across countries.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 1999.13.

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Date of creation: Feb 1999
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Handle: RePEc:fem:femwpa:1999.13

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Keywords: Wage inequality; Low wage employment; Labour market institutions;

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References

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  1. David Card & Francis Kramarz & Thomas Lemieux, 1996. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," NBER Working Papers 5487, National Bureau of Economic Research, Inc.
  2. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
  3. Peter Gottschalk, 1997. "Inequality, Income Growth, and Mobility: The Basic Facts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 21-40, Spring.
  4. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  5. Freeman, Richard B, 1980. "The Exit-Voice Tradeoff in the Labor Market: Unionism, Job Tenure, Quits, and Separations," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 643-73, June.
  6. Francine D. Blau & Lawrence M. Kahn, 1994. "International Differences in Male Wage Inequality: Institutions versus Market Forces," NBER Working Papers 4678, National Bureau of Economic Research, Inc.
  7. Anders Bjorklund & Richard B. Freeman, 1994. "Generating Equality and Eliminating Poverty, The Swedish Way," NBER Working Papers 4945, National Bureau of Economic Research, Inc.
  8. Coen N. Teulings, 1998. "The Contribution of Minimum Wages to Increasing Wage Inequality," Tinbergen Institute Discussion Papers 98-093/3, Tinbergen Institute.
  9. Edwin Leuven & Hessel Oosterbeek & Hans van Ophem, 2004. "Explaining international differences in male skill wage differentials by differences in demand and supply of skill," Economic Journal, Royal Economic Society, vol. 114(495), pages 466-486, 04.
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Cited by:
  1. Andrea Borgarello & Francesco Devicienti, 2002. "What Accounts For the Rise in Wage Inequality in Italy? Evidence from Administrative Matched Employer-Employee Data, 1985-1996," LABORatorio R. Revelli Working Papers Series 18, LABORatorio R. Revelli, Centre for Employment Studies.
  2. Checchi, Daniele & Pagani, Laura, 2004. "The Effects of Unions on Wage Inequality: The Italian Case in the 1990s," IZA Discussion Papers 1385, Institute for the Study of Labor (IZA).
  3. Anna M.Falzoni & Alessandra Venturini & Claudia Villosio, 2005. "Wage Differentials and International Trade in Italy Using Individual Micro Data 1991-1996," Working Papers 0502, University of Bergamo, Department of Economics.
  4. Barth, Erling & Lucifora, Claudio, 2006. "Wage Dispersion, Markets and Institutions: The Effects of the Boom in Education on the Wage Structure," IZA Discussion Papers 2181, Institute for the Study of Labor (IZA).
  5. Anna M. Falzoni & Alessandra Venturini & Claudia Villosio, 2007. "Skilled and Unskilled Wage Dynamics in Italy in the ‘90s: Changes in the individual characteristics, institutions, trade and technology," LABORatorio R. Revelli Working Papers Series 61, LABORatorio R. Revelli, Centre for Employment Studies.
  6. Francesco Devicienti & Agata Maida, 2004. "Rigidità salariali e ruolo delle istituzioni: l'evidenza empirica da microdati," LABORatorio R. Revelli Working Papers Series 35, LABORatorio R. Revelli, Centre for Employment Studies.
  7. Melchor Fernández & Alberto Meixide & Hipólito J. Simón, . "El trabajo de bajos salarios en España," Studies on the Spanish Economy 152, FEDEA.
  8. François Rycx & Robert Plasman, 2001. "Collective bargaining and poverty: a cross-national perspective," ULB Institutional Repository 2013/795, ULB -- Universite Libre de Bruxelles.
  9. Hübler, Olaf & Meyer, Wolfgang, 2000. "Industrial Relations and the Wage Differentials between Skilled and Unskilled Blue-Collar Workers within Establishments: An Empirical Analysis with Data of Manufacturing Firms," IZA Discussion Papers 176, Institute for the Study of Labor (IZA).
  10. Kenworthy, Lane, 2002. "Do affluent countries face an income-jobs tradeoff?," MPIfG Discussion Paper 01/10, Max Planck Institute for the Study of Societies.

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