Labor market institutions and income inequality: an empirical exploration

This paper presents evidence on the impact of labor regulations on income inequality using a recently published database on labor institutions and outcomes as well as different panel data analysis techniques for a large sample of countries for 1970–2000. When applying our preferred technique we find that both de jure and de facto regulations improve the distribution of income although the former appear to be non-robustly associated with improving income inequality. This result partly reflects the fact that regulations are endogenous and, more interestingly, that different regulation yield distinct effects.