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Labour Market Institutions and the Personal Distribution of Income in the OECD

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  • DANIELE CHECCHI
  • CECILIA GARCÍA‐PEÑALOSA

Abstract

A large literature has studied the impact of labour market institutions on wage inequality, but their effect on income inequality has received little attention. This paper argues that personal income inequality depends on the wage differential, the labour share and the unemployment rate. Labour market institutions affect income inequality through these three channels, and their overall effect is theoretically ambiguous. We use a panel of OECD countries for the period 1960–2000 to examine these effects. We find that greater unionization and greater wage bargaining coordination have opposite effects on inequality, implying conflicting effects of greater union presence on income inequality.

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  • Daniele Checchi & Cecilia García‐Peñalosa, 2010. "Labour Market Institutions and the Personal Distribution of Income in the OECD," Economica, London School of Economics and Political Science, vol. 77(307), pages 413-450, July.
  • Handle: RePEc:bla:econom:v:77:y:2010:i:307:p:413-450
    DOI: 10.1111/j.1468-0335.2009.00776.x
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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