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Does Inequality Promote Employment? An International Comparison

  • Sonja Jovicic

    (Schumpeter School, University of Wuppertal)

  • Ronald Schettkat

    (Schumpeter School, University of Wuppertal)

This paper investigates whether the ‘big tradeoff’ between efficiency and inequality exists, and analyzes empirically the relationship between inequality, redistribution, and employment/unemployment. The analysis is based on a cross-country longitudinal data set (panel data) of 21 OECD countries in the period 1980 to 2010. We use inequality and redistribution measures (output indicators) rather than institutional variables (input indicators) as independent variables. We do not find a significant effect of income and wage distribution on labor market performance and cannot confirm the hypothesized ‘big tradeoff’.

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File URL: http://elpub.bib.uni-wuppertal.de/servlets/DerivateServlet/Derivate-3437/sdp13009.pdf
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Paper provided by Universitätsbibliothek Wuppertal, University Library in its series Schumpeter Discussion Papers with number SDP13009.

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Length: 35
Date of creation: Dec 2013
Date of revision:
Handle: RePEc:bwu:schdps:sdp13009
Contact details of provider: Web page: http://elpub.bib.uni-wuppertal.de

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  1. Lawrence F. Katz & Kevin M. Murphy, 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," NBER Working Papers 3927, National Bureau of Economic Research, Inc.
  2. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  3. David Card & Francis Kramarz & Thomas Lemieux, 1996. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," NBER Working Papers 5487, National Bureau of Economic Research, Inc.
  4. Richard Freeman, 2005. "Labour market institutions without blinders: The debate over flexibility and labour market performance," International Economic Journal, Taylor & Francis Journals, vol. 19(2), pages 129-145.
  5. Alan B. Krueger & Jorn-Steffen Pischke, 1997. "Observations and Conjectures on the U.S. Employment Miracle," NBER Working Papers 6146, National Bureau of Economic Research, Inc.
  6. Dew-Becker, Ian & Gordon, Robert J, 2008. "Controversies about the Rise in American Inequality: A Survey," CEPR Discussion Papers 6817, C.E.P.R. Discussion Papers.
  7. Eswar Prasad, 2000. "The Unbearable Stability of the German Wage Structure; Evidence and Interpretation," IMF Working Papers 00/22, International Monetary Fund.
  8. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality In The United States, 1913-1998," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 1-39, February.
  9. Finis Welch, 1999. "In Defense of Inequality," American Economic Review, American Economic Association, vol. 89(2), pages 1-17, May.
  10. Ronald SCHETTKAT, 2010. "Will only an earthquake shake up economics?," International Labour Review, International Labour Organization, vol. 149(2), pages 185-207, 06.
  11. David Card, 1996. "Deregulation and Labor Earnings in the Airline Industry," NBER Working Papers 5687, National Bureau of Economic Research, Inc.
  12. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, MIT Press, vol. 124(2), pages 843-881, May.
  13. Dew-Becker, Ian & Gordon, Robert J, 2005. "Where did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income," CEPR Discussion Papers 5419, C.E.P.R. Discussion Papers.
  14. Howell David R. & Baker Dean & Glyn Andrew & Schmitt John, 2007. "Are Protective Labor Market Institutions at the Root of Unemployment? A Critical Review of the Evidence," Capitalism and Society, De Gruyter, vol. 2(1), pages 1-73, May.
  15. Dan Devroye & Richard B. Freeman, 2001. "Does Inequality in Skills Explain Inequality in Earnings Across Advanced Countries?," NBER Working Papers 8140, National Bureau of Economic Research, Inc.
  16. N. Gregory Mankiw, 2013. "Defending the One Percent," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 21-34, Summer.
  17. James Heckman & Pedro Carneiro, 2003. "Human Capital Policy," NBER Working Papers 9495, National Bureau of Economic Research, Inc.
  18. Ronald Schettkat & Rongrong Sun, 2008. "Monetary Policy and European Unemployment," Schumpeter Discussion Papers sdp08002, Universitätsbibliothek Wuppertal, University Library.
  19. Andrew Glyn & David Howell & John Schmitt, 2006. "Labor Market Reforms: The Evidence Does Not Tell the Orthodox Tale," Challenge, M.E. Sharpe, Inc., vol. 49(2), pages 5-22, April.
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