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Earnings Inequality, Institutions and the Macroeconomy – What Can We Learn from Ireland’s Boom Years?

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  • Brian Nolan

    (School of Applied Social Sciences and Geary Institute, UCD)

  • Bertrand Maitre

    (School of Applied Social Sciences and Geary Institute, UCD)

  • Sarah Voitchovsky

    (School of Applied Social Sciences and Geary Institute, UCD)

Abstract

Rapid economic growth is often expected to lead to increased returns to education and skills and thus to rising wage inequality. Ireland offers a valuable case study, with distinctive wage-setting institutions and exceptional rates of growth in output, employment and incomes in the Celtic Tiger period from 1994 to 2007. We find that dispersion in (hourly) wage inequality fell sharply to 2000, before increasing though much less sharply to 2007. Returns to both education and work experience declined considerable in the earlier period, while the increase in lower earnings relative to the median was associated with the introduction of the minimum wage in 2000, anchoring the bottom of the distribution. For 2000-2007 the faster increase in higher earnings may be associated with the changing pattern of immigration and of the employment growth in the second half of the boom, Further exploration of the factors at work towards the top of the distribution during these years is an important research priority.

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File URL: http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201016.pdf
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Bibliographic Info

Paper provided by Geary Institute, University College Dublin in its series Working Papers with number 201016.

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Length: 45 pages
Date of creation: 15 Mar 2010
Date of revision:
Handle: RePEc:ucd:wpaper:201016

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  1. Barrett, Alan & McCarthy, Yvonne, 2007. "The Earnings of Immigrants in Ireland: Results from the 2005 EU Survey of Income and Living Conditions," IZA Discussion Papers 2990, Institute for the Study of Labor (IZA).
  2. Dinardo, J. & Fortin, N.M. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Cahiers de recherche 9406, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  3. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
  4. Alan Barrett & David Duffy, 2007. "Are Ireland's Immigrants Integrating into its Labour Market?," Papers WP199, Economic and Social Research Institute (ESRI).
  5. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731.
  6. Alan Barrett & Yvonne McCarthy, 2007. "Immigrants in a Booming Economy: Analysing Their Earnings and Welfare Dependence," LABOUR, CEIS, vol. 21(4-5), pages 789-808, December.
  7. Melly, Blaise, 2005. "Decomposition of differences in distribution using quantile regression," Labour Economics, Elsevier, vol. 12(4), pages 577-590, August.
  8. John DiNardo & Thomas Lemieux, 1997. "Diverging male wage inequality in the United States and Canada, 1981-1988: Do institutions explain the difference?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 50(4), pages 629-651, July.
  9. Alan Barrett & Séamus McGuinness & Martin O'Brien, 2012. "The Immigrant Earnings Disadvantage across the Earnings and Skills Distributions: The Case of Immigrants from the EU's New Member States," British Journal of Industrial Relations, London School of Economics, vol. 50(3), pages 457-481, 09.
  10. 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.
  11. Seamus McGuinness & Frances McGinnity & Philip J. O'Connell, 2008. "Changing Returns to Education During a Boom? The Case of Ireland," Papers WP227, Economic and Social Research Institute (ESRI).
  12. Donal O'Neill & Brian Nolan & James Williams, 2006. "Evaluating the Introduction of a National Minimum Wage: Evidence from a New Survey of Firms in Ireland," LABOUR, CEIS, vol. 20(1), pages 63-90, 03.
  13. Thomas Lemieux, 2008. "The changing nature of wage inequality," Journal of Population Economics, Springer, vol. 21(1), pages 21-48, January.
  14. Nolan, Brian & O'Neill, Donal & Williams, James, 2002. "The Impact of The Minimum Wage on Irish Firms," Research Series, Economic and Social Research Institute (ESRI), number PRS44, September.
  15. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
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Cited by:
  1. Brian Nolan & Bertrand Maitre & Sarah Voitchovsky & Christopher Whelan, 2012. "GINI DP 70: Inequality and Poverty in Boom and Bust: Ireland as a Case Study," GINI Discussion Papers 70, AIAS, Amsterdam Institute for Advanced Labour Studies.

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