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IZA
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Labour Market Institutions and Wage Inequality
by
Winfried Koeniger, Marco Leonardi, Luca Nunziata
(September 2004)
revised version published in: Industrial and Labor Relations Review, 2007, 60 (3), 340-356
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.
Text: See Discussion Paper No. 1291 
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