Wage inequality and varieties of capitalism

This article draws on a new data set that enables the authors to compare the distribution of income from employment across OECD countries. Specifically, the article conducts a pooled cross-sectional time-series analysis of the determinants of wage inequality in sixteen countries from 1973 to 1995. The analysis shows that varieties of capitalism matter. The authors find that the qualities that distinguish social market economies from liberal market economies shape the way political and institutional variables influence wage inequality. Of particular interest to political scientists is the finding that the wage-distributive effects of government partisanship are contingent on institutional context. Union density emerges in the analysis as the single most important factor influencing wage inequality in both institutional contexts.