Labour Market Institutions and Wage Inequality

Winfried Koeniger, Marco Leonardi and Luca Nunziata

No 1291, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper we investigate the importance of labor market institutions such as unemployment insurance, unions, firing regulation and minimum wages for the evolution of wage inequality across countries. We derive a simple log-linear equation of the wage differential as a function of the institutional parameters, total factor productivity, final good prices and relative skill supply. Our estimates for 11 OECD countries imply that labor market institutions can account for a large part of the change of wage inequality across countries after controlling for time and country effects.

Keywords: bilateral monopoly; wage differential by skill; labor market institutions; country panel data (search for similar items in EconPapers)
JEL-codes: E24 J31 J51 J65 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2004-09
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (31)

Published - revised version published in: Industrial and Labor Relations Review, 2007, 60 (3), 340-356

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Journal Article: Labor Market Institutions and Wage Inequality (2007)
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