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When Supply Meets Demand: Wage Inequality in Portugal

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  • Centeno, Mario

    ()
    (Banco de Portugal)

  • Novo, Alvaro A.

    ()
    (Banco de Portugal)

Abstract

Wage inequality in Portugal increased over the last quarter of century. The period from 1982 to 1995 witnessed strong increases in both upper- and lower-tail inequality. A shortage of skills combined with skill-biased technological changes are at the core of this evolution. Since 1995, lower-tail inequality decreased, while upper-tail inequality increased at a slower rate. The supply of high-skilled workers more than doubled during this period, contributing significantly to the slowdown. Polarization of employment demand is the more credible explanation for the more recent evolution. As in other developed economies, for instance Germany and the United States, we show that institutions played a minor role in shaping changes in inequality.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4592.

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Length: 37 pages
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4592

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Keywords: inequality; polarization; supply; demand; institutions;

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References

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  1. Pedro S. Martins, 2008. "Dismissals for cause: The difference that just eight paragraphs can make," Working Papers 24, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  2. Nidardo, J. & Fortin, N. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Papers 93-94-15, California Irvine - School of Social Sciences.
  3. David Card & John E. DiNardo, 2002. "Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," NBER Working Papers 8769, National Bureau of Economic Research, Inc.
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  6. Ana Rute Cardoso & Pedro Portugal, 2005. "Contractual Wages and the Wage Cushion under Different Bargaining Settings," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 875-902, October.
  7. Martins, Pedro S. & Pereira, Pedro T., 2004. "Does education reduce wage inequality? Quantile regression evidence from 16 countries," Labour Economics, Elsevier, vol. 11(3), pages 355-371, June.
  8. Maarten Goos & Alan Manning, 2007. "Lousy and Lovely Jobs: The Rising Polarization of Work in Britain," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 118-133, February.
  9. Cardoso, Ana Rute, 1998. "Earnings Inequality in Portugal: High and Rising?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(3), pages 325-43, September.
  10. José Ferreira Machado & José Mata, 1998. "Earning Functions in Portugal 1982-1994: Evidence From Quantile Regressions," Working Papers w199802, Banco de Portugal, Economics and Research Department.
  11. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
  12. Dustmann, Christian & Ludsteck, Johannes & Schönberg, Uta, 2007. "Revisiting the German Wage Structure," IZA Discussion Papers 2685, Institute for the Study of Labor (IZA).
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Cited by:
  1. Mário Centeno & Cláudia Duarte & Álvaro A. Novo, 2011. "The impact of the minimum wage on low-wage earners," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  2. David Card & Ana Rute Cardoso, 2011. "Can Compulsory Military Service Increase Civilian Wages? Evidence from the Peacetime Draft in Portugal," NBER Working Papers 17694, National Bureau of Economic Research, Inc.
  3. Anabela Carneiro & José Varejão, 2012. "Establishment Turnover and the Evolution of Wage Inequality," CEF.UP Working Papers 1202, Universidade do Porto, Faculdade de Economia do Porto.
  4. Luca David Opromolla, 2013. "Trade and wage inequality," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.

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