The determinants of income inequality in OECD countries

Political partisanship and welfare state reform in advanced industrial societies

Pasquale Tridico

Cambridge Journal of Economics, 2018, vol. 42, issue 4, 1009-1042

Abstract: The objective of this paper is to identify the determinants of the increase in income inequality that OECD countries have experienced over the past two decades. My hypothesis is that along with the financialisation of economies that has taken place since 1990, inequality increased because labour flexibility intensified, labour market institutions weakened as trade unions lost power, and public social spending started to retrench and did not compensate for the vulnerabilities created by the globalisation process. Using data from 25 high-income OECD countries from 1990 to 2013, I empirically evaluate this hypothesis. My results clearly suggest that the increase in inequality over the past two decades is caused by an increase in financialisation, a deepening of labour flexibility, the weakening of trade unions and the retrenchment of the welfare state.

Keywords: Inequality; Financialisation; Labour market; Welfare states (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (27)

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