The Economics of Rising Inequalities

Both the "fundamentalist" view and the "institutionalist" view have some relevance. For instance, the decline of traditional manufacturing employment since the 1970s has been associated in every developed country with a rise of labour-market inequality (the inequality of labour earnings within the working-age population has gone up in all countries), which lends support to the fundamentalist view. However, most people agree that institutional differences (minimum wage, collective bargaining, tax and transfer policy, and so forth) between Continental European countries and Anglo-Saxon countries explain why disposable income inequality trajectories have been so different in those two groups of countries during the 1980s-90s, which lends support to the institutionalist view.