Labour Market Institutions and Wage Inequality

37 Pages Posted: 8 Sep 2004

See all articles by Winfried Koeniger

Winfried Koeniger

University of St. Gallen; CESifo (Center for Economic Studies and Ifo Institute); Center for Financial Studies (CFS); IZA Institute of Labor Economics

L. Nunziata

University of Padua - Department of Economics; IZA Institute of Labor Economics

Marco Leonardi

Università degli Studi di Milano; IZA Institute of Labor Economics

Date Written: September 2004

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: labor market institutions, wage differential by skill, bilateral monopoly, country panel data

JEL Classification: E24, J31, J51, J65

Suggested Citation

Koeniger, Winfried and Nunziata, Luca and Leonardi, Marco, Labour Market Institutions and Wage Inequality (September 2004). IZA Discussion Paper No. 1291. Available at SSRN: https://ssrn.com/abstract=588141

Winfried Koeniger

University of St. Gallen ( email )

Swiss Institute for Empirical Economic Research
Varnbüelstr. 14
St.Gallen, CH-9000
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Schaumburg-Lippe Str. 7/9
D-53072 Bonn
Germany

Luca Nunziata

University of Padua - Department of Economics ( email )

via Del Santo 33
Padova, 35123
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Marco Leonardi (Contact Author)

Università degli Studi di Milano ( email )

14 Via Vetere
20122 Milano
Italy
+39 02 58100384 (Phone)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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