Labour Market Institutions and the Personal Distribution of Income in the OECD

39 Pages Posted: 28 Jul 2005

See all articles by Daniele Checchi

Daniele Checchi

Università degli Studi di Milano - Dipartimento di Economia Politica e Aziendale (DEPA); IZA Institute of Labor Economics; IRVAPP

C. Garcia-Peñalosa

National Center for Scientific Research (CNRS) - GREQAM; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2005

Abstract

We examine the determinants of differences across countries and over time in the distribution of personal incomes in the OECD. The Gini coefficient of personal incomes can be expressed as a function of the wage differential, the labour share, and the unemployment rate, hence labour market institutions are an essential determinant of the distribution of income, although the sign of their impact is ambiguous. We use a panel of OECD countries for the period 1970-96 to examine these effects. We find, first, that the labour share remains an important determinant of overall inequality patterns, and, second, that stronger unions and a more generous unemployment benefit tend to reduce income inequality. High capital-labour ratios also emerge as a strong equalising factor, which has in part offset the impact of increasing wage inequality on the US distribution of personal incomes.

Keywords: income inequality, labour share, trade unions

JEL Classification: D31, D33

Suggested Citation

Checchi, Daniele and Garcia-Penalosa, Cecilia, Labour Market Institutions and the Personal Distribution of Income in the OECD (November 2005). IZA Discussion Paper No. 1681, CESifo Working Paper Series No. 1608, Available at SSRN: https://ssrn.com/abstract=770004

Daniele Checchi (Contact Author)

Università degli Studi di Milano - Dipartimento di Economia Politica e Aziendale (DEPA) ( email )

Milan, 20122
Italy
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IZA Institute of Labor Economics

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IRVAPP ( email )

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Cecilia Garcia-Penalosa

National Center for Scientific Research (CNRS) - GREQAM ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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