Wage Inequality and Intangible Capital : The Role of Unionization and Minimum Wage

The rise in college wage premium is well documented, though with shifting sands of consensus on its main causes. This paper intends to investigate if, and how, intangible capital drives wage inequality, and to what extent the outcomes can be shaped by pre-distribution policies. We construct a task-function model that formalizes production as a combination of multiple specialized functions consisting of different tasks to propose that i) intangibles widens wage inequality; ii) unionization for low-wage workers reduces wage inequality and moderates the wage dis-equalizing effect of the intangibles; iii) while minimum wage tames wage inequality, increasing minimum wage, which lifts the wage floor should the bargaining fail, reduces the relevance of unionization in wage inequality reduction. We take the propositions to a panel data of 15 EU countries covering 13 industries over 8 years using dynamic and system GMM estimators. The findings are robustly in favor of the propositions