Labor Market Regulations and Income Inequality: Evidence for a Panel of Countries
AbstractThis paper presents evidence on the impact of labor regulations on income inequality using two recently published databases on labor institutions and outcomes (Rama and Artecona, 2002; Botero, Djankov, La Porta, López-de-Silanes and Shleifer, 2003) and different cross-section and panel data analysis techniques for a sample of 121 countries over the 1970-2000 period. When we consider the techniques most likely to be robust, we find that: (i) de jure regulations do not improve income distribution; (ii) relative compliance with existing regulations improves income distribution; (iii) de facto regulations are weakly associated with improving income inequality. This result partly reflects the fact that regulations are endogenous and, more interestingly, different regulations have quite distinct effects. In particular, we find that any redistributive effect of labor regulations may come from trade union membership, public employment and mandated benefits (proxied by maternity leave).
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Bibliographic InfoPaper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4375.
Date of creation: Oct 2004
Date of revision:
Other versions of this item:
- César Calderón & Alberto Chong & Rodrigo O. Valdés, 2005. "Labor Market Regulations and Income Inequality: Evidence for a Panel of Countries," Central Banking, Analysis, and Economic Policies Book Series, in: Jorge Restrepo & Andrea Tokman R. & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edi (ed.), Labor Markets and Institutions, edition 1, volume 8, chapter 7, pages 221-279 Central Bank of Chile.
- César Calderón & Rodrigo Valdés & Alberto E. Chong, 2004. "Labor Market Regulations and Income Inequality: Evidence for a Panel of Countries," IDB Publications 6683, Inter-American Development Bank.
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