Do Labor Market Policies and Growth Fundamentals Matter for Income Inequality in Oecd Countries? Some Empirical Evidence
IMF Working Papers, January 1, 1997
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- Do Labor Market Policies and Growth Fundamentals Matter for Income Inequality in Oecd Countries? Some Empirical Evidence
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Bibliographic details
- Authors: Patrick Van Houdt
- Published: January 1, 1997
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451841862.001
Research question and model
- Examines whether income distribution is related to fundamentals affecting economic growth and to labor market policies.
- Presents a model in which:
- Labor market policies affect unemployment, which in turn affects inequality.
- Changes in per capita income affect inequality through the accumulation of physical capital and technological know–how.
Key empirical findings
- The resulting reduced–form relationship, when estimated, has surprisingly high explanatory power: on average, it explains about three quarters of the variation in inequality measures for the OECD countries.
- Granger Causality tests confirm the model’s predictions.
- Notes explicitly that "inequality is affected by unemployment."
Policy-relevant implications (as implied by model and findings)
- Labor market policies that influence unemployment can have material effects on income inequality.
- Policies that promote accumulation of physical capital and technological know–how (linked to per capita income changes) are relevant for the evolution of inequality.
Subjects and keywords
- Subjects: Active labor market policies, Income distribution, Income inequality, Labor, Labor market policy, National accounts, Personal income
- Keywords: Active labor market policies, Income distribution, income gain, Income inequality, income share, investment share, Labor market policy, labor market training, OECD employment outlook, per capita income, Personal income, physical capital, top-to-bottom income ratio, WP
Content in this bundle
- Do Labor Market Policies and Growth Fundamentals Matter for Income Inequality in OECD Countries?