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Inequality and Labor Market Institutions

Florence Jaumotte and Carolina Osorio Buitron

No 2015/014, IMF Staff Discussion Notes from International Monetary Fund

Abstract: The SDN examines the role of labor market institutions in the rise of income inequality in advanced economies, alongside other determinants. The evidence strongly indicates that de-unionization is associated with rising top earners’ income shares and less redistribution, while eroding minimum wages are related to increases in overall income inequality. The results, however, also suggest that a lack of representativeness of unions may be associated with higher inequality. These findings do not necessarily constitute a blanket recommendation for higher unionization and minimum wages, as country-specific circumstances and potential trade-offs with other policy objectives need to be considered. Addressing inequality also requires a multipronged approach, which should include taxation reform and curbing excesses associated with financial deregulation.

Keywords: Personal income; Income inequality; Labor market institutions; Income distribution; Minimum wages; SDN,income share,union density,union (search for similar items in EconPapers)
Pages: 30
Date: 2015-07-01
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