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Wage Inequalities and Low Pay: The Role of Labour Market Institutions

  • Claudio Lucifora

    (Political Sciences Department, University of Palermo)

In this study, we investigate the role that some institutional features play in shaping the distribution of wages across a number of OECD countries. While considerable attention has been devoted in recent years to the evolution of earnings inequality and to the analysis of the competing explanations for the observed phenomena, also the existence (and persistence) of considerable structural differences - across countries - in the level of wage inequality and the incidence of low pay can shed some light on a different dimension of inequality patterns. In particular, we focus on three specific features: the effects of trade unions, the structure of collective bargaining and the existence of regulations on wages. By looking at the different moments of the distribution of earnings various dimensions of low pay have been analysed, namely the effects of the institutional setting on the mean, the dispersion and the (time) covariance of earnings. Consistent with previous work, our results suggest that institutions are a relevant factor in shaping the distribution of earnings and the incidence of low pay. We show that institutional settings differ substantially across countries and that institutional variety in the labour market is able to explain a great deal of the observed patterns in low pay across countries.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 1999.13.

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Date of creation: Feb 1999
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Handle: RePEc:fem:femwpa:1999.13
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  1. A Bjorklund & Richard Freeman, 1995. "Generating Equality and Eliminating Poverty the Swedish Way," CEP Discussion Papers dp0228, Centre for Economic Performance, LSE.
  2. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  3. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
  4. David Card & Francis Kramarz & Thomas Lemieux, 1995. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," Working Papers 734, Princeton University, Department of Economics, Industrial Relations Section..
  5. Freeman, Richard B, 1980. "The Exit-Voice Tradeoff in the Labor Market: Unionism, Job Tenure, Quits, and Separations," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 643-73, June.
  6. Peter Gottschalk, 1997. "Inequality, Income Growth, and Mobility: The Basic Facts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 21-40, Spring.
  7. Francine D. Blau & Lawrence M. Kahn, 1994. "International Differences in Male Wage Inequality: Institutions versus Market Forces," NBER Working Papers 4678, National Bureau of Economic Research, Inc.
  8. Edwin Leuven & Hessel Oosterbeek & Hans van Ophem, 2004. "Explaining international differences in male skill wage differentials by differences in demand and supply of skill," Economic Journal, Royal Economic Society, vol. 114(495), pages 466-486, 04.
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