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Wage Inequality in Europe: the Role of Labour Market and Redistributive Institutions

In: Social Pacts, Employment and Growth. A Reappraisal of Ezio Tarantelli’s Thought

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  • Elisabetta Croci Angelini

    (Università di Macerata)

  • Francesco Farina

    (Università di Siena)

Abstract

The chapter documents the rising trend in wage inequality in Europe and trace it back to a number of factors. Industrial relations have an influence on the degree of wage dispersion, thus being a determinant of macroeconomic performance. Social pacts do not necessarily have a negative influence on the employment level by reducing wage dispersion. In fact, in the case of Scandinavian countries social pacts have been compatible with an increase in wage dispersion. Overall, labour market deregulation and decentralised wage setting increase wage inequality, but the effect can to some extent be compensated by income redistribution policy. In any case, the increase in wage inequality in Europe is inconsistent with those theories (like Krugman’s) holding a negative causal relationship between wage compression and low-skilled employment.

Suggested Citation

  • Elisabetta Croci Angelini & Francesco Farina, 2007. "Wage Inequality in Europe: the Role of Labour Market and Redistributive Institutions," AIEL Series in Labour Economics, in: Nicola Acocella & Riccardo Leoni (ed.), Social Pacts, Employment and Growth. A Reappraisal of Ezio Tarantelli’s Thought, edition 1, chapter 10, pages 195-217, AIEL - Associazione Italiana Economisti del Lavoro.
    • Handle: RePEc:ail:chapts:02-10
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    Cited by:

    1. Elisabetta Croci Angelini & Francesco Farina, 2007. "Technological choices under institutional constraints: measuring the impact on earnings dispersion," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 006, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
    2. Croci Angelini, Elisabetta & Sorana, Silvia, 2011. "Income distribution, standard of living and capabilities: a cross-sectoral analysis," 122nd Seminar, February 17-18, 2011, Ancona, Italy 99587, European Association of Agricultural Economists.
    3. Simone Bertoli & Francesco Farina, 2007. "The functional distribution of income: a review of the theoretical literature and of the empirical evidence around its recent pattern in European countries," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 005, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.

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    More about this item

    Keywords

    Wage inequality; decentralised wage setting; redistribution policy.;
    All these keywords.

    JEL classification:

    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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