Inequality and Labor Market Institutions

IMF Staff Discussion Note No. 15/14

31 Pages Posted: 26 Oct 2015

See all articles by Florence Jaumotte

Florence Jaumotte

International Monetary Fund (IMF)

Carolina Osorio-Buitron

International Monetary Fund (IMF)

Date Written: July 17, 2015

Abstract

The paper examines the role of labor market institutions in the rise of income inequality in advanced economies, alongside other determinants. The evidence strongly indicates that de-unionization is associated with rising top earners’ income shares and less redistribution, while eroding minimum wages are related to increases in overall income inequality. The results, however, also suggest that a lack of representativeness of unions may be associated with higher inequality. These findings do not necessarily constitute a blanket recommendation for higher unionization and minimum wages, as country-specific circumstances and potential trade-offs with other policy objectives need to be considered. Addressing inequality also requires a multipronged approach, which should include taxation reform and curbing excesses associated with financial deregulation.

Keywords: Inequality, top income shares, unions, minimum wage

JEL Classification: D63, E25, J3, J5

Suggested Citation

Jaumotte, Florence and Osorio-Buitron, Carolina, Inequality and Labor Market Institutions (July 17, 2015). IMF Staff Discussion Note No. 15/14, Available at SSRN: https://ssrn.com/abstract=2678639 or http://dx.doi.org/10.2139/ssrn.2678639

Florence Jaumotte (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States
202-623-6191 (Phone)

Carolina Osorio-Buitron

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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