Institutions, Wages and Inequality: The Case of Europe and its Periphery (1500-1899)
Davin Chor ()
No 1, CID Working Papers from Center for International Development at Harvard University
This paper explores the long-run relationship between institutions and wage inequality in Europe and its periphery using a two-sector model. When institutions improve, wages rise across the board, thus reducing the costs of rural-urban migration and skills acquisition relative to the expected urban wage. The subsequent increase in the supply of urban craftsmen can in turn lead to a narrowing of the relative gap between skilled and unskilled wages. These predictions are borne out by the historical data. Cities with stronger institutions experienced: (i) higher skilled and unskilled real wages, and (ii) lower levels of urban inequality, as measured by the skilled-unskilled wage ratio.
Keywords: Institutions; Wage inequality; Rural-urban migration; European cities (search for similar items in EconPapers)
JEL-codes: J31 N13 N33 O10 O15 (search for similar items in EconPapers)
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Journal Article: Institutions, wages, and inequality: The case of Europe and its periphery (1500-1899) (2005)
Working Paper: Institutions, Wages and Inequality: The Case of Europe and its Periphery (1500-1899) (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:cid:wpfacu:1
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