Template-type: ReDIF-Paper 1.0
Author-Name: Denisa Maria Sologon
Author-Email: denisa.sologon@ceps.lu
Author-Workplace-Name: UNU-MERIT/MGSoG, Maastricht University, CEPS/INSTEAD
	 Luxemburg, and IZA Germany
Author-Name: O'Donoghue, Cathal
Author-Workplace-Name: Teagasc, NUI, Ireland
Title: Cross-national trends in permanent earnings inequality and earnings instability
	in Europe 1994-2001
Abstract: Using a fully harmonized panel dataset across 14 European countries
	between the early- 1990s and 2001, the European Community Household
	Panel, we fill a gap in the literature with a cross-national comparative
	study which explores the trends in persistent inequality and transitory
	inequality across countries belonging to a common economic area, but
	with different systems and with different rates of adaptation to the
	economic reality of the 1990s. The covariance structure of earnings is
	estimated using minimum distance methods. We find a substantial degree
	of convergence in the overall inequality among the Mediterranean, the
	Continental and the Anglo-Saxon countries, which reflects a convergence
	in both permanent and transitory inequality. Among the
	Nordic/Flexicurity countries we find a strong divergence in the overall
	inequality, driven by a divergence in both permanent and transitory
	inequality. Pooling most countries in Europe, we find evidence of a
	strong convergence in earnings instability. The Nordic/Flexicurity
	countries have a lower overall inequality, a lower persistent inequality
	and a higher earnings mobility. These cross-national differences in
	persistent inequality and earnings instability across Europe can be
	partly explained by the labour market policies and institutions linked
	with the wage-setting mechanism. The stricter the regulation in the
	labour and product market, the higher the persistent inequality. The
	higher the unionization, the degree of corporatism, and the tax wedge
	the lower persistent inequality. Corporatist systems are associated with
	a lower earnings instability than decentralized ones.
Classification-JEL: C23, D31, J31
Keywords: earnings dynamics, permanent inequality, transitory inequality 
Series: UNU-MERIT Working Papers
Creation-Date: 2012
Number: 006
File-URL: http://www.merit.unu.edu/publications/wppdf/2012/wp2012-006.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2012006