Essays on institutions and earnings inequality

This thesis describes and analyzes the earnings inequality in the United Kingdom and related countries in particular Italy and Germany, incorporating institutional measures and changes. There are three main tasks: firstly, Chapter 2 shows that earnings inequality as well as skill premiums have increased substantially over the last thirty years. A simple supply-demand analysis can only broadly fit with the wage structure changes, but leave much space for institutional explanation (Chapter 3). Secondly, after controlling for the workers’ main characteristics, changes of technology, industrial structure and labor market conditions, our estimates imply that institutional changes (mainly trade union decline) can account for a substantial part of the rise of skill premiums since the 1970s (Chapter 4). Finally, Chapter 5 and Chapter 6 compare the real wage flexibility in the UK with Italy and Germany, which have centralized collective agreements. We find flexible wages in the private sector in the UK and only in the prosperous regions in Italy (the north) and Germany (the west). When regions within a country are prosperous, the different types of wage-setting institution give similar results. However, when a region is lagging, collective bargaining delays recovery.