Worker power, rent-seeking and income inequality in Canada: A sector-level analysis

Silas Xuereb ()
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Silas Xuereb: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, WIL - World Inequality Lab

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Abstract: Neoclassical economics' explanations of the income distribution typically ignore the role of various forms of power. This paper explores the relationships between worker power, market power, rentseeking and the income distribution using a novel panel dataset on sector-level income distributions in Canada from 2000-2019. Levels of within-sector inequality were relatively stable throughout this time period but there is significant between-sector variation. Finance and insurance contributes disproportionately to top-end income inequality. Workers' bargaining power explains a significant portion of between-sector variation in inequality. Increases in market power and decreases in unionization are related to increases in sector-level income inequality. Increases in real average incomes at the sector level are associated with increases in top shares three years later and this effect is mitigated by high unionization. Results are discussed within the broader context of Canadian income inequality and the relationship between power and wage-setting.

Date: 2022-09
New Economics Papers: this item is included in nep-com and nep-hme
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