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When Supply Meets Demand: Wage Inequality in Portugal

  • Centeno, Mario

    ()

    (Banco de Portugal)

  • Novo, Alvaro A.

    ()

    (Banco de Portugal)

Wage inequality in Portugal increased over the last quarter of century. The period from 1982 to 1995 witnessed strong increases in both upper- and lower-tail inequality. A shortage of skills combined with skill-biased technological changes are at the core of this evolution. Since 1995, lower-tail inequality decreased, while upper-tail inequality increased at a slower rate. The supply of high-skilled workers more than doubled during this period, contributing significantly to the slowdown. Polarization of employment demand is the more credible explanation for the more recent evolution. As in other developed economies, for instance Germany and the United States, we show that institutions played a minor role in shaping changes in inequality.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4592.

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Length: 37 pages
Date of creation: Nov 2009
Date of revision:
Publication status: forthcoming in: IZA Journal of European Labor Studies, 2014
Handle: RePEc:iza:izadps:dp4592
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  1. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
  2. Pedro S. Martins, 2008. "Dismissals for cause: The difference that just eight paragraphs can make," Working Papers 24, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
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  5. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
  6. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, MIT Press, vol. 124(2), pages 843-881, May.
  7. Lawrence F. Katz & Kevin M. Murphy, 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," NBER Working Papers 3927, National Bureau of Economic Research, Inc.
  8. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-44, September.
  9. José A. F. Machado & José Mata, 2001. "Earning functions in Portugal 1982-1994: Evidence from quantile regressions," Empirical Economics, Springer, vol. 26(1), pages 115-134.
  10. Cardoso, Ana Rute, 1998. "Earnings Inequality in Portugal: High and Rising?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(3), pages 325-43, September.
  11. Martins, Pedro S. & Pereira, Pedro T., 2004. "Does education reduce wage inequality? Quantile regression evidence from 16 countries," Labour Economics, Elsevier, vol. 11(3), pages 355-371, June.
  12. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
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