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

January 1, 1997

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Patrick Van Houdt. Do Labor Market Policies and Growth Fundamentals Matter for Income Inequality in Oecd Countries? Some Empirical Evidence, (USA: International Monetary Fund, 1997) accessed December 21, 2024

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.

Subject: 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

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1997/003
Stock No:

WPIEA0031997
ISBN:

9781451841862
ISSN:

1018-5941

Notes

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

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