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Minimum Wage Systems and Earnings Inequalities: Does Institutional Diversity Matter?

Listed author(s):
  • Andrea Garnero
  • Stephan Kampelmann
  • François Rycx

This paper explores how the diversity of minimum wage systems affects earnings inequalities within European countries. It relies on the combination of (a) harmonized micro-data from household surveys, (b) data on national statutory minimum wages and coverage rates, and (c) hand-collected information on minimum rates from more than 1,100 sectoral-level agreements across Europe. The analysis covers 18 countries over the period 2007-2009. Empirical results confirm the intuition of many practitioners that the combination of sectoral minimum rates and high coverage of collective bargaining can, at least for earnings inequalities, be regarded as a functional equivalent to a binding statutory minimum wage at the national level. Regression results suggest indeed that both a national statutory minimum wage and, in countries with sectoral-level minima, a higher collective bargaining coverage are significantly associated with lower levels of (overall and inter-industry) wage inequalities and a smaller fraction of workers paid below prevailing minima. Several robustness checks confirm these findings.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 13-021.

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Length: 32 p.
Date of creation: 17 May 2013
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/143827
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  1. Manning, Alan, 2003. "The real thin theory: monopsony in modern labour markets," Labour Economics, Elsevier, vol. 10(2), pages 105-131, April.
  2. 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 1001-1044, September.
  3. repec:hal:journl:halshs-00353896 is not listed on IDEAS
  4. David H. Autor & Alan Manning & Christopher L. Smith, 2016. "The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 58-99, January.
  5. Stephan Kampelmann, 2009. "Inequality Measures as Conventions: New Interpretations of a Classic Operationalization Problem," ULB Institutional Repository 2013/109410, ULB -- Universite Libre de Bruxelles.
  6. Tim Butcher & Richard Dickens & Alan Manning, 2012. "Minimum wages and wage inequality: some theory and an application to the UK," LSE Research Online Documents on Economics 48937, London School of Economics and Political Science, LSE Library.
  7. Juan Dolado & Francis Kramarz & Steven Machin & Alan Manning & David Margolis & Coen Teulings, 1996. "The Economic Impact of Minimum Wages in Europe," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00353896, HAL.
  8. Damian Grimshaw & Gerhard Bosch & Jill Rubery, 2014. "Minimum Wages and Collective Bargaining: What Types of Pay Bargaining Can Foster Positive Pay Equity Outcomes?," British Journal of Industrial Relations, London School of Economics, vol. 52(3), pages 470-498, 09.
  9. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-649, May.
  10. Rubery, Jill., 2003. "Pay equity, minimum wage and equality at work," ILO Working Papers 993668723402676, International Labour Organization.
  11. David S. Lee, 1999. "Wage Inequality in the United States During the 1980s: Rising Dispersion or Falling Minimum Wage?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 977-1023.
  12. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
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