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Labour Market Institutions and Wage Inequality

  • Koeniger, Winfried

    ()

    (University of St. Gallen)

  • Leonardi, Marco

    ()

    (University of Milan)

  • Nunziata, Luca

    ()

    (University of Padova)

In this paper we investigate the importance of labor market institutions such as unemployment insurance, unions, firing regulation and minimum wages for the evolution of wage inequality across countries. We derive a simple log-linear equation of the wage differential as a function of the institutional parameters, total factor productivity, final good prices and relative skill supply. Our estimates for 11 OECD countries imply that labor market institutions can account for a large part of the change of wage inequality across countries after controlling for time and country effects.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1291.

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Length: 37 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1291
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