Shaping persistent earnings inequality: labour market policy and institutional factors
AbstractThis paper explores the role of labour market policy and institutional factors in explaining cross-national differences in persistent earnings inequality in Europe. Using non-linear least squares we reveal a complex framework, where institutions and their systemic interactions play a decisive role in shaping persistent inequality. "Piece-meal" reforms appear more effective in reducing persistent inequality than comprehensive policy packages: a substitution effect in reducing persistent inequality emerges between labour market deregulation, deunionization, the transition from a decentralized to a corporatist economy, increasing tax wedge, product market deregulation, increasing active labour market policies, and decreasing generosity of the unemployment benefit. Under special conditions, however, some complementarity effects do emerge. Moreover, the effect of each reform depends on the institutional mix. High corporatism emerges as the most effective tool in reducing the adverse effects of macroeconomic shocks on persistent inequality.
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Bibliographic InfoPaper provided by CEPS/INSTEAD in its series CEPS/INSTEAD Working Paper Series with number 2011-22.
Length: 40 pages
Date of creation: Feb 2011
Date of revision:
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inequality; permanent earnings inequality; labour market institutions; labour market policies;
Find related papers by JEL classification:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- J00 - Labor and Demographic Economics - - General - - - General
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-12 (All new papers)
- NEP-EUR-2011-03-12 (Microeconomic European Issues)
- NEP-HME-2011-03-12 (Heterodox Microeconomics)
- NEP-LAB-2011-03-12 (Labour Economics)
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- Denisa Maria Sologon & O'Donoghue, Cathal, 2011.
"Shaping earnings instability: labour market policy and institutional factors,"
MERIT Working Papers, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)
077, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- SOLOGON Denisa & O?DONOGHUE Cathal, 2012. "Shaping earnings instability: labour market policy and institutional factors," CEPS/INSTEAD Working Paper Series, CEPS/INSTEAD 2012-06, CEPS/INSTEAD.
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