Globalisation, technological progress and changes in regulations and institutions – which impact on the rise of earnings inequality in OECD countries?

Wen-Hao Chen (), Michael Förster and Ana Llena-Nozal ()

No 597, LIS Working papers from LIS Cross-National Data Center in Luxembourg

Abstract: This paper examines the distributive impact of economic globalisation, technological progress and changes in labour market policies, regulations and institutions in OECD countries over the past quarter century, up to the Great Recession. It identifies the relevant pathways between macro-economic developments and earnings inequality among the whole working-age population by accounting for both changes in wage dispersion among workers and changes in earnings gaps between the employed and non-employed. The results suggest that technological progress is a key driver behind the upward trend of earnings inequality; it transmitted inequality mainly through raising wage dispersion. Economic globalisation, in terms of both rapidly rising trade and financial integration, appears overall distributional neutral once other factors, in particular changes in policies and institutions, are also controlled for. Regulatory reforms that aimed at promoting growth and productivity appeared to exert contrasting effects: they tended to close the gap between employed and non-employed, by increasing job opportunities but at the same time also contributed to greater wage inequality. Finally, the growth in the supply of skilled workers is an important equalizing factor contributing not only to reduce wage dispersion among workers but also to higher employment rates. Up-skilling provided a sizable counterweight to the increase in earnings inequality resulting from technological progress, pressure from globalisation and institutional changes.

Keywords: Globalisation; innovation; labour market institutions; inequality; employment (search for similar items in EconPapers)
JEL-codes: F16 J50 O15 O30 (search for similar items in EconPapers)
Pages: 96 pages
Date: 2013-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in A summary version of this paper has been published as Part I (chapters 1-3) in Divided We Stand – Why Inequality Keeps Rising, Paris: OECD Publishing, 2011

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Persistent link: https://EconPapers.repec.org/RePEc:lis:liswps:597

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