Do Labor Market Policies and Growth Fundamentals Matter for Income Inequality in Oecd Countries? Some Empirical Evidence

Author/Editor:

Patrick Van Houdt

Publication Date:

January 1, 1997

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Income distribution may be related to fundamentals affecting economic growth and to labor market policies. Noting that inequality is affected by unemployment. This paper presents a model in which labor market policies affect unemployment which in turn affects inequality. The model also includes the effects of changes in per capita income on inequality through the accumulation of physical capital and technological know–how. When a resulting reduced–form relationship is estimated, its explanatory power is surprisingly high: on average, it explains about three quarters of the variation in inequality measures for the OECD countries, and Granger Causality tests confirm the model’s predictions.

Series:

Working Paper No. 1997/003

Subject:

Active labor market policies Income distribution Income inequality Labor Labor market policy National accounts Personal income

Notes:

Also published in Staff Papers, Vol. 44, No. 3, September 1997.

English

Publication Date:

January 1, 1997

ISBN/ISSN:

9781451841862/1018-5941

Stock No:

WPIEA0031997

Pages:

26

Please address any questions about this title to publications@imf.org