Wage Inequality in Europe: the Role of Labour Market and Redistributive Institutions

Elisabetta Croci Angelini and Francesco Farina
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Francesco Farina: Università di Siena

Chapter 10 in Social Pacts, Employment and Growth. A Reappraisal of Ezio Tarantelli’s Thought, 2007, pp 195-217 from AIEL - Associazione Italiana Economisti del Lavoro

Abstract: The chapter documents the rising trend in wage inequality in Europe and trace it back to a number of factors. Industrial relations have an influence on the degree of wage dispersion, thus being a determinant of macroeconomic performance. Social pacts do not necessarily have a negative influence on the employment level by reducing wage dispersion. In fact, in the case of Scandinavian countries social pacts have been compatible with an increase in wage dispersion. Overall, labour market deregulation and decentralised wage setting increase wage inequality, but the effect can to some extent be compensated by income redistribution policy. In any case, the increase in wage inequality in Europe is inconsistent with those theories (like Krugman’s) holding a negative causal relationship between wage compression and low-skilled employment.

Keywords: Wage inequality; decentralised wage setting; redistribution policy. (search for similar items in EconPapers)
JEL-codes: H24 J52 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (2)

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Chapter: Wage Inequality in Europe: the Role of Labour Market and Redistributive Institutions (2007)
Working Paper: Wage Inequality in Europe: the Role of Labour Market and Redistributive Institutions
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