Inequality and Labour-Market Performance: A Survey Beyond an Elusive Trade-Off

University of Salerno Dipartimento di Scienze Economiche e Statistiche Working Paper No. 3.176

52 Pages Posted: 21 Feb 2010

See all articles by Giuseppe Mastromatteo

Giuseppe Mastromatteo

Catholic University of the Sacred Heart of Milan

Sergio Destefanis

University of Salerno

Date Written: February 20, 2006

Abstract

In this paper we assess the evolution of employment and wage inequality in Europe and the US labour markets over the past two decades. We find that the salient trends in wage structures are more complicated than implied by the so-called “unified theory.” Furthermore there is no clear cross-country correlation between changes in wage and employment rates by skill categories. This brings us to consider in detail other factors mentioned in the literature as contributing to poor labour-market performance in Europe. We find that strong unions, a factor often believed to bring about wage compression and poor labour-market performance, are not necessarily associated with the latter when bargaining is sufficiently coordinated. We also find that successful welfare reforms can bring about considerable improvements in performance without much impact on inequality. Finally we point out that the role of industrial structure and of the housing sector cannot be neglected when explaining cross-country labour-market performance.

Keywords: Unemployment, Wage Inequality, Labour and Product-Market Institutions

JEL Classification: E24, P17, P52

Suggested Citation

Mastromatteo, Giuseppe and Destefanis, Sergio, Inequality and Labour-Market Performance: A Survey Beyond an Elusive Trade-Off (February 20, 2006). University of Salerno Dipartimento di Scienze Economiche e Statistiche Working Paper No. 3.176, Available at SSRN: https://ssrn.com/abstract=1556431 or http://dx.doi.org/10.2139/ssrn.1556431

Giuseppe Mastromatteo

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

Sergio Destefanis (Contact Author)

University of Salerno ( email )

Via Giovanni Paolo II, 132
Fisciano, Salerno 84084
Italy

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