Do Labor Market Policies and Growth Fundamentals Matter for Income Inequality in Oecd Countries? Some Empirical Evidence

Patrick Van Houdt
Authors registered in the RePEc Author Service: Patrick Vanhoudt ()

No 1997/003, IMF Working Papers from International Monetary Fund

Abstract: Income distribution may be related to fundamentals affecting economic growth and to labor market policies. Noting that inequality is affected by unemployment. This paper presents a model in which labor market policies affect unemployment which in turn affects inequality. The model also includes the effects of changes in per capita income on inequality through the accumulation of physical capital and technological know–how. When a resulting reduced–form relationship is estimated, its explanatory power is surprisingly high: on average, it explains about three quarters of the variation in inequality measures for the OECD countries, and Granger Causality tests confirm the model’s predictions.

Keywords: WP; physical capital; income share; top-to-bottom income ratio; investment share; per capita income; labor market training; OECD employment outlook; income gain; Income inequality; Labor market policy; Personal income; Income distribution; Active labor market policies (search for similar items in EconPapers)
Pages: 26
Date: 1997-01-01
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Citations: View citations in EconPapers (13)

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Journal Article: Do Labor Market Policies and Growth Fundamentals Matter for Income Inequality in OECD Countries?: Some Empirical Evidence (1997)
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