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Monetary Policy and Labour Income Inequality: A Regional Approach

Author

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  • Barbora Livorova

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Czech National Bank)

  • Adam Gersl

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)

Abstract

This paper contributes to studying the impacts of monetary policy on labour income inequality in the euro area using subnational regional data on compensation per employee. The dataset covers 932 NUTS3 regions from 16 countries over the period 2000 - 2022 at a yearly frequency. Using sub-sample analysis combined with local projections, the results show that monetary policy rate changes have heterogeneous effects on the growth of real compensation per employee (deflated by the GDP deflator) at both the bottom and upper ends of the regional distribution within individual countries. From the whole euro area perspective, monetary policy tightening has a heterogeneous effect on labour incomes between regions - in times of monetary policy easing, shortening the gap between average low- and high-income regions.

Suggested Citation

  • Barbora Livorova & Adam Gersl, 2025. "Monetary Policy and Labour Income Inequality: A Regional Approach," Working Papers IES 2025/27, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Nov 2025.
    • Handle: RePEc:fau:wpaper:wp2025_27
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    File URL: https://ies.fsv.cuni.cz/en/monetary-policy-and-labour-income-inequality-regional-approach
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    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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