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Labour market institutions and the personal distribution of income in the OECD

  • Daniele Checchi

    ()

    (Department of Economics - University of Milan)

  • Cecilia Garcìa-Peñalosa

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

A large literature has studied the impact of labour market institutions on wage inequality, but their effect on income inequality has received little attention. In this paper we argue that personal income inequality is a function of the wage differential, the labour share, and the unemployment rate. Labour market institutions then 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 a higher degree of wage bargaining coordination have opposite effects on inequality, implying conflicting effects of greater union presence on the distribution of income.

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Paper provided by HAL in its series Working Papers with number halshs-00341005.

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Date of creation: 24 Nov 2008
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Handle: RePEc:hal:wpaper:halshs-00341005
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