Monetary Policy and Labour Income Inequality: A Regional Approach

Barbora Livorova and Adam Gersl
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Barbora Livorova: Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Czech National Bank

No 2025/27, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: This paper contributes to studying the impacts of monetary policy on labour income inequality in the euro area using subnational regional data on compensation per employee. The dataset covers 932 NUTS3 regions from 16 countries over the period 2000 - 2022 at a yearly frequency. Using sub-sample analysis combined with local projections, the results show that monetary policy rate changes have heterogeneous effects on the growth of real compensation per employee (deflated by the GDP deflator) at both the bottom and upper ends of the regional distribution within individual countries. From the whole euro area perspective, monetary policy tightening has a heterogeneous effect on labour incomes between regions - in times of monetary policy easing, shortening the gap between average low- and high-income regions.

Keywords: Monetary Policy; Regional Inequality; Compensation of employees; Local Projections (search for similar items in EconPapers)
JEL-codes: E52 J31 R10 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2025-11, Revised 2025-11
New Economics Papers: this item is included in nep-cba, nep-eec, nep-lma, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2025_27

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