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This paper investigates international differences in wage inequality and skills and whether a compressed wage distribution is associated with high unemployment across core OECD countries. Wage dispersion and wage structure are widely debated among policymakers; compressed wage structure is often perceived as an important cause of high unemployment. Firstly, this paper examines differences in wage dispersion across OECD countries and their link to skill dispersion. Some countries that have more compressed (dispersed) wage structures simultaneously have more compressed (dispersed) skill structures as well, and skill differences explain part of the differences in wage dispersion. However, even when accounted for skills, some countries have a more compressed wage structure, most likely caused by labor market institutions. We do not find an effect of wage compression on the labor market performance in the low-skill sector. Based on the Program for International Assessment of Adult Competencies (PIAAC) survey of adult skills for core OECD countries, this paper cannot confirm the skill compression nor wage compression hypotheses. Rather than insisting on the deregulation of labor market institutions and reductions in public welfare policy as the main policy recommendations to achieve higher employment (and higher wage inequality), policymakers should reconsider aggregate demand deficiency and the variation in macroeconomic policies as potential explanations for the employment differences across countries. JEL Classification: J31, J24, E24 [ABSTRACT FROM AUTHOR]

According to the 2003 National Household Survey, mean labour income for an indigenous worker is only 56% of that for a non-indigenous worker. Studies of ethnic discrimination in Peru's labour markets generally find that discrimination is too low to explain inequalities of this magnitude. However, Sigma Theory (Figueroa 2003) predicts that social exclusion is a source of inter-ethnic inequality, and that has not been empirically tested. The primary aim of this paper is to fill this gap by estimating the extent to which exclusion and discrimination contribute to income inequality. Hurdle models are used to tackle down econometric endogeneity of years of schooling and truncation-at-zero of incomes. The results imply that exclusion plays a stronger role on inequality than discrimination: without exclusion, the Gini of labour income would decrease from 0.64 to 0.45, and without discrimination it would be reduced to 0.50. [ABSTRACT FROM AUTHOR]

The majority of mainstream economists believe that globalization and trade liberalization have had a minor role in increasing U.S. wage inequality. A minority argues that capital mobility and outsourcing indicate a larger effect. This paper first surveys these views, and then argues that how we understand the policy consequences of trade liberalization helps determine the character our analysis of the issue itself. Thus, a shift in policy perspective, to consider the "equity costs" of trade liberalization in terms of eroded U.S. labor market institutions, produces a larger framework for analyzing the consequences of globalization and trade liberalization than is available in traditional comparative advantage efficiency reasoning. From this wider perspective, trade liberalization has likely had a greater impact on U.S. wage inequality than even the minority mainstream position allows. [ABSTRACT FROM AUTHOR]