Institutional change and wage inequality

Jiancai Pi and Yanwei Fan

International Review of Economics & Finance, 2021, vol. 71, issue C, 440-452

Abstract: This paper analyzes how institutional change affects wage inequality. Institutional change is regarded as the reduction of contractual incompleteness. When institutions become better, contracts are less incomplete. Our main finding is that institutional change will narrow down (resp. widen) wage inequality if the share of the surplus in the skilled sector is sufficiently low (resp. high). When introducing incomplete contracts into the framework of skilled-unskilled wage inequality, we can obtain some different insights.

Keywords: Institutional change; Wage inequality; Incomplete contract (search for similar items in EconPapers)
JEL-codes: J31 P45 P48 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:71:y:2021:i:c:p:440-452

DOI: 10.1016/j.iref.2020.09.012

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