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Book part
Publication date: 25 February 2016

Luca Flabbi, James Mabli and Mauricio Salazar

This paper provides household lifetime inequality indexes derived from representative U.S. labor market data. We obtain this result by using estimates of the household…

Abstract

This paper provides household lifetime inequality indexes derived from representative U.S. labor market data. We obtain this result by using estimates of the household search model proposed by Flabbi and Mabli (2012). Inequality indexes computed on the benchmark model shows that inequality in utility values is substantially different from inequality in earnings and wages and that inequality at the cross-sectional level is significantly different from inequality at the lifetime level. Both results deliver original policy implications that would have not been captured without using our approach. In particular, we find that a counterfactual policy experiment consisting in a mean-preserving spread of the wage offers distributions increases lifetime inequality in wages and earnings but not in utility. When comparing inequality at the individual level between men and women, we find inequality in wages and earnings to be higher for husbands than wives but inequality in utility to be higher for wives. A counterfactual decomposition shows that the job offers parameters are the main source of the gender differential.

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Inequality: Causes and Consequences
Type: Book
ISBN: 978-1-78560-810-0

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Book part
Publication date: 25 April 2011

Miriam A. Golden and Michael Wallerstein†

Purpose – We study the determinants of growing wage inequality in 16 OECD countries in the past two decades of the twentieth century. The main independent variables that…

Abstract

Purpose – We study the determinants of growing wage inequality in 16 OECD countries in the past two decades of the twentieth century. The main independent variables that we consider are those pertaining to labor market institutions, to international trade with less developed nations, and to deindustrialization.

Methodology – We specify a statistical model of pay differentials using first differences over five-year periods. The main estimation method used is weighted ordinary least squares. Where necessary, we use instrumental variables and two-stage least squares. We also undertake extensive robustness exercises, including a version of extreme bounds analysis and deleting each individual country from the analysis.

Findings – The determinants of wage inequality are different in the 1980s and in the 1990s. In the 1980s, growing wage dispersion is due to changes in the institutions of the labor market, including declining unionization and declines in the level at which wages are bargained collectively. In the 1990s, increases in pay inequality are due to increasing trade with less developed nations and weakening of social insurance programs.

Originality – This is the first study to report that the causes for pay inequality differed between the 1980s and the 1990s. It is also the first to document statistically that trade with the less developed nations systematically increases pay inequality in the developed world in the 1990s.

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Comparing European Workers Part A
Type: Book
ISBN: 978-1-84950-947-3

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Book part
Publication date: 25 February 2016

Stephen Machin

Labour markets across the globe have recently been characterized by rising wage inequality, real wage stagnation or both. Most academic work to date considers each in…

Abstract

Labour markets across the globe have recently been characterized by rising wage inequality, real wage stagnation or both. Most academic work to date considers each in isolation, but the research in this paper attempts to pull them together, arguing that higher wage inequality takes on an added significance if real wages of the typical worker are not growing, and showing that inequality rises and real wage slowdowns have gone hand-in-hand with one another due to wages decoupling from productivity in the United States and United Kingdom. The lack of growth of real wages at the median in the United States is also shown to be linked to the declining influence of trade unions.

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Inequality: Causes and Consequences
Type: Book
ISBN: 978-1-78560-810-0

Keywords

Article
Publication date: 7 August 2018

Merita Zulfiu Alili and Nick Adnett

The last two decades have been characterised by a rise in income and wage inequality in a wide range of countries, including European transition countries. The rise in…

Abstract

Purpose

The last two decades have been characterised by a rise in income and wage inequality in a wide range of countries, including European transition countries. The rise in globalisation is one major factor explaining this increasing wage inequality. International trade and FDI have increased significantly since the beginning of transition and the purpose of this paper is to focus on whether FDI plays an important role in explaining the pattern of wage inequality in selected transition countries.

Design/methodology/approach

A cross-country empirical investigation has been conducted using two alternative measures of wage inequality: the Gini coefficient and the Theil index. Several model specifications and estimation strategies have been employed to obtain consistent estimates and to check for the robustness of the results.

Findings

The results indicate that a rising share of inward FDI in gross domestic product (GDP) increased wage inequality in transition economies, though its overall effect was relatively small. Considering the long run, there is no clear evidence of a concave relationship between FDI and wage inequality, which may be a consequence of the relatively low levels of FDI in many transition countries.

Practical implications

Inwards FDI has made a small contribution to increasing wage inequality in European transition economies. However, its overall beneficial effects on labour markets in these countries suggest that rather than restricting FDI governments should target increasing the supply of skilled labour.

Originality/value

This new empirical evidence supports the hypothesis that an increased inward FDI stock as a share of GDP increases wage inequality in transition economies, however, this relationship is a complex one. Differences in average wages, wage differentials, employment shares of skilled workers and relative size of the foreign-owned sector are all likely to be important for the behaviour of wage inequality.

Details

International Journal of Social Economics, vol. 45 no. 9
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 26 September 2008

Kunal Sen

There has been a period of slow but a steady increase in wage inequality in the Indian manufacturing sector since the mid‐1980s, which has gone hand‐in‐hand with an…

Abstract

Purpose

There has been a period of slow but a steady increase in wage inequality in the Indian manufacturing sector since the mid‐1980s, which has gone hand‐in‐hand with an increase in the relative employment of skilled workers across all industries in the same period. The purpose of this paper is to investigate whether the co‐movement of relative employment and wages of skilled workers can be attributed to the changes in trade policy that has occurred in the Indian economy since the mid‐1980s.

Design/methodology/approach

The two dominant theoretical perspectives on why trade reforms lay lead to wage inequality are Heckscher–Ohlin theory and trade‐induced skill‐biased technological change (SBTC). The paper evaluates the applicability of these theoretical perspectives to the Indian case using disaggregated industry data from Annual Survey of Industries from 1973 to 1997.

Findings

Evidence was found of the validity of both the two dominant theoretical perspectives on wage inequality to explain the co‐movement in wage inequality and relative skill intensity in Indian manufacturing, with both variables increasing in the 1990s. Trade‐induced technological progress has led to an increase in relative skill intensity and wage inequality within industries. At the same time, the decline in protection that seems to have occurred more in unskilled labour‐intensive industries has led to a relative fall in the economy‐wide return to unskilled labour relative to skilled labour. Therefore, trade reforms have led to a widening of wage gap between skilled and unskilled workers, and an increase in relative skill intensity in Indian manufacturing.

Originality/value

The paper contributes to support of the trade‐induced SBTC hypothesis which may provide a consistent explanation of why many countries in the south experienced increases in wage inequality with the onset of trade liberalisation.

Details

Indian Growth and Development Review, vol. 1 no. 2
Type: Research Article
ISSN: 1753-8254

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Article
Publication date: 3 May 2016

Clemens Ohlert

The purpose of this paper is to examine the role wage dispersion across establishments has played in recent increases in total wage inequality in Germany and compares it…

Abstract

Purpose

The purpose of this paper is to examine the role wage dispersion across establishments has played in recent increases in total wage inequality in Germany and compares it to inequality changes at the individual level. It is queried whether the contribution of establishment heterogeneity to the rise of wage inequality stems from changes of institutional settings or from structures such as establishment size and the composition of the workforce.

Design/methodology/approach

Applying regression-based decompositions of variance to German linked employer-employee panel data for the years 2000-2010 it is analysed to what extent changes associated to firm structures contribute to the rise of total wage inequality.

Findings

Results show that the rise in wage inequality in Germany to a great extent is associated to rising wage variance across establishments, implying that establishment specific wage premiums have grown. By further decomposing across firm components of wage inequality, it is found that changes in across establishment wage inequality related to collective bargaining, worker co-determination and internal labour markets together account for about 3 per cent of the rise in total inequality. Inequality changes related to establishments’ skill and occupational composition account for about 11 per cent and establishment size alone accounts for about 18 per cent of the rise in total inequality.

Originality/value

The main contribution is to quantify the relation of specific establishment characteristics to the rise in total wage inequality over time. Conclusions are drawn about the importance of mechanisms of rent sharing at the firm level in comparison to the determination of wages by individual qualification.

Details

International Journal of Manpower, vol. 37 no. 2
Type: Research Article
ISSN: 0143-7720

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Article
Publication date: 28 February 2020

Yoshimichi Murakami and Tomokazu Nomura

This study aims to analyse the contribution of the expansion and diversification of higher education to Chile's increase in wage inequality from 1992 to 2000 and its…

Abstract

Purpose

This study aims to analyse the contribution of the expansion and diversification of higher education to Chile's increase in wage inequality from 1992 to 2000 and its subsequent decrease from 2000 to 2013.

Design/methodology/approach

The wage equation for each year is estimated using data from the national household survey, Encuesta de Caracterización Socioeconómica Nacional (CASEN). Using the method proposed by Firpo et al. (2009), the evolution of wage changes is decomposed into composition and wage structure effects of each explanatory variable at different points of the wage distribution.

Findings

The results show that the positive composition effect of higher education, derived from the increasing share of both workers with university degrees and those with vocational degrees, is substantially larger at the upper quantiles and exceeds the negative wage structure effect, thereby contributing to increasing wage inequality from 1992 to 2000. By contrast, the negative wage structure effect of higher education, primarily derived from the decreasing return to university degrees, is substantially larger at the upper quantiles and exceeds the positive composition effect, thereby contributing to decreasing wage inequality from 2000 to 2013.

Originality/value

This study contributes to the literature by showing that the expansion of higher education increased inequality in the 1990s and decreased it in the 2000s while the increasing supply of workers with vocational degrees decreased wage premiums for university degrees in the latter period.

Details

Journal of Economic Studies, vol. 47 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

Book part
Publication date: 30 September 2014

Carsten Schröder

When individual or household incomes are collected for administrative or scientific surveys, the accounting period is sometimes a month, sometimes a quarter, and sometimes…

Abstract

When individual or household incomes are collected for administrative or scientific surveys, the accounting period is sometimes a month, sometimes a quarter, and sometimes a year. The accounting period likely affects the shape of the income distribution and the level of measured inequality. The present study systematically explores the sensitivity of inter-temporal and inter-regional inequality comparisons to the length of the accounting period.

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Economic Well-Being and Inequality: Papers from the Fifth ECINEQ Meeting
Type: Book
ISBN: 978-1-78350-556-2

Keywords

Book part
Publication date: 25 February 2016

Elizabeth Weber Handwerker and James R. Spletzer

This paper uses the microdata of the Occupational Employment Statistics (OES) Survey to assess the contribution of occupational concentration to wage inequality between…

Abstract

This paper uses the microdata of the Occupational Employment Statistics (OES) Survey to assess the contribution of occupational concentration to wage inequality between establishments and its growth over time. We show that occupational concentration plays an important role in wage determination for workers, in a wide variety of occupations, and can explain some establishment-level wage variation. Occupational concentration is increasing during the 2000–2011 time period, although much of this change is explained by other observable establishment characteristics. Overall, occupational concentration can help explain a small amount of wage inequality growth between establishments during this time period.

Details

Inequality: Causes and Consequences
Type: Book
ISBN: 978-1-78560-810-0

Keywords

Book part
Publication date: 19 June 2011

Lucio Baccaro

Purpose – Ascertaining the extent to which the generalized decline in union density, as well as the erosion in centralized bargaining structures and developments in other…

Abstract

Purpose – Ascertaining the extent to which the generalized decline in union density, as well as the erosion in centralized bargaining structures and developments in other labor institutions, have contributed to rising within-country inequality.

Methodology – Econometric analysis of a newly developed dataset combining information on industrial relations and labor law, various dimensions of globalization, and controls for demand and supply of skilled labor for 51 Advanced, Central and Eastern European, Latin American, and Asian countries from the late 1980s to the early 2000s, followed by an analysis of 16 advanced countries over a longer time frame (from the late 1970s to the early 2000s).

Findings – In contrast to previous research, which finds labor institutions to be important determinants of more egalitarian wage or income distributions, the chapter finds that trade unionism and collective bargaining are no longer significantly associated with within-country inequality, except in the Central and Eastern European countries. These findings are interpreted as the result of trade unionism operating under more stringent structural constraints than in the past, partly as a result of globalization trends. In addition, despite much talk about welfare state crisis, welfare states, historically the result of labor's power and mobilization capacity, still play an important redistributive role, at least in advanced countries.

Practical implications – Union attempts at equalizing incomes by compressing market earnings seem ineffective and impractical in the current day and age. Unions should seek to increase the workers’ skill levels and promote an egalitarian transformation of the workplace. This type of “supply-side” egalitarianism is not a new strategy for unions, but is very much embedded in the unions’ DNA.

Details

Comparing European Workers Part B: Policies and Institutions
Type: Book
ISBN: 978-0-85724-931-9

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