Minimum Wage Systems and Earnings Inequalities: Does Institutional Diversity Matter?

Andrea Garnero, Stephan Kampelmann and Francois Rycx

No 8419, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper explores how the diversity of minimum wage systems affects earnings inequalities within European countries. It relies on the combination of (a) harmonized micro-data from household surveys, (b) data on national statutory minimum wages and coverage rates, and (c) hand-collected information on minimum rates from more than 1,100 sectoral-level agreements across Europe. The analysis covers 18 countries over the period 2007-2009. Empirical results confirm the intuition of many practitioners that the combination of sectoral minimum rates and high coverage of collective bargaining can, at least for earnings inequalities, be regarded as a functional equivalent to a binding statutory minimum wage at the national level. Regression results suggest indeed that both a national statutory minimum wage and, in countries with sectoral-level minima, a higher collective bargaining coverage are significantly associated with lower levels of (overall and inter-industry) wage inequalities and a smaller fraction of workers paid below prevailing minima. Several robustness checks confirm these findings.

Keywords: wage inequality; collective bargaining; minimum wage systems; Europe (search for similar items in EconPapers)
JEL-codes: J31 J33 J51 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2014-08
New Economics Papers: this item is included in nep-eur and nep-lab
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Citations: View citations in EconPapers (6)

Forthcoming - published in: European Journal of Industrial Relations, 2015, 21 (2), 115-130

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Related works:
Working Paper: Minimum wage systems and earnings inequalities: Does institutional diversity matter? (2015)
Working Paper: Minimum wage systems and earnings inequalities: Does institutional diversity matter? (2015)
Working Paper: Minimum wage systems and earnings inequalities: Does institutional diversity matter? (2015)
Working Paper: Minimum Wage Systems and Earnings Inequalities:Does Institutional Diversity Matter? (2013)
Working Paper: Minimum Wage Systems and Earnings Inequalities: Does Institutional Diversity Matter? (2013)
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