This paper presents both theoretical analysis and econometric evidence for the United States, Great Britain and Norway on the extent to which hourly wages of different groups of workers are sensitive to local labour market conditions. We focus on differences by union status. Our theoretical...

The complementarity between wage setting and welfare spending can explain how almost equally rich countries differ in economic and social equality among their citizens. More wage equality increases the welfare generosity via political competition in elections. A more generous welfare state fuels...