Labour-Market Deregulation and Inequality in Portugal: A Critical Reassessment

This paper reassesses the institutional interpretation of Portuguese inequality dynamics advanced by Alcobia and Leal (2026), who argue that declining union density and labour-market liberalisation were the principal drivers of rising top-income concentration in Portugal between 1980 and 2023. Using replication exercises, alternative institutional measures, narrative reform indicators, rolling regressions, structuralbreak diagnostics, VARs, local projections and comparative OECD panel evidence, the paper evaluates the robustness and causal interpretation of the original framework. The results show that the estimated institutional relationships are highly sensitive to specification choice, institutional measurement, sample composition and crisis-period observations. Once broader controls for educational upgrading, productivity change, sectoral transformation and macroeconomic adjustment are incorporated, the estimated e??ects weaken substantially and frequently lose statistical significance. Dynamic estimation and causality analysis further provide limited support for a stable one-directional causal mechanism running from labour-market deregulation toward inequality. Instead, Portuguese inequality appears to have evolved jointly with broader processes of structural modernization, globalization, technological change and repeated macroeconomic adjustment. Overall, the findings caution against interpreting labour-market deregulation as the dominant driver of Portuguese inequality and emphasize the importance of evaluating labour-market institutions within a broader framework balancing equity, productivity and economic adaptability.