International Differences in Male Wage Inequality: Institutions versus Market Forces

Abstract

While changes in the demand for skilled labor appear to have led to a widening of the wage structures in many countries during the 1980s, considerable differences in the level of wage inequality remain. In this paper, we examine the sources of these differences, focusing primarily on explaining the considerably higher level of wage inequality in the U.S. We fmd that the greater overall dispersion of the U.S. wage distribution reflects considerably more compression at the bottom of the disthbution in the other countries, but relatively little difference in the degree of wage inequality at the top. While differences in the distribution of measured characteristics help to explain some aspects of the international differences, U.S. labor market prices--that is, higher rewards to labor market skills--arc an important factor. Labor market institutions, chiefly the relatively decentralized wage-setting mechanisms in the U.S. compared to other countries, appear to provide the most persuasive explanation for these international differences in prices.In contrast, the pattern of cross-country differences in relative supplies of and demands for skills does not appear to be consistent with the pattern of observed differences in wage inequality.

Wages and the bargaining regime in a corporatist setting: the Netherlands

“…This conclusion is consistent with cross-country evidence, see Teulings (1999). The results counter the argument of Blau and Kahn (1996) that collective bargaining equalises on observable characteristics and leaves inequality from unobserved characteristics unaffected.…”

“…At the mean firm size for firms 7 Brown and Medoff (1989) Table 3 shows that the wage structure in the uncovered sector does not come out as markedly different from the bargaining sector. The only outstanding effect is the gender gap; this is a commonly found effect of collective bargaining (Teulings and Hartog, 1998;Blau and Kahn, 1996) The regime that really stands apart is firm bargaining where we find the largest differences in coefficients compared to the other regimes. The firm bargaining regime is more idiosyncratic than the no-bargaining regime.…”

State Transfers, Taxes and Income Inequality in Brazil

“…In several developed countries, public work contributes to reduced inequality (BLAU AND KAHN, 1996;GUSTAFSSON and JOHANSSON, 1999;MILANOVIC, 1994). This is not the case in Brazil.…”

“…These studies found that public work contributes to reduced inequality (BLAU and KAHN, 1996;GUSTAFSSON and JOHANSSON, 1999;MILANOVIC, 1994), that strong unions and centralized bargaining of wages typical of public workers are determinants of lower levels of income inequality (CHECCHI and GARCÍA-PEÑALOSA, 2010;GOTTSCHALK and SMEEDING, 1997;GUSTAFSSON and JOHANSSON, 1999) and that corporatist welfare state policies are more capable of reducing inequality than targeted policies because of the "paradox of redistribution", that is, (contributory) universalism legitimizes more spending than targeting and it is the level of expenditures that matters most to inequality (GOUDSWAARD and CAMINADA, 2010;KORPI and PALME, 1998;MAHLER and JESUIT, 2006;SMEEDING, 2005).…”

Measuring and Promoting Wellbeing: How Important is Economic Growth?

“…6 As a general matter, international comparisons show that stronger unions and higher levels of collective bargaining are associated with a narrower wage and earnings spread, as are more stringent employment protection laws (Blau and Kahn, 1996). Those narrower wage spreads reduce labour force participation rates, especially among the unskilled (Blau and Kahn, 1996). Moreover, while employment protection laws reduce the rate at which protected workers transition to unemployment, they increase the duration of those spells of unemployment, with the second effect being greater than the first (Blanchard and Portugal, 1998).…”