Diverse Disparities

Abstract

It is widely thought that among the countries in the Organisation for Economic Co-operation and Development (OECD), income inequality has become more widespread over the past decades. The authors show that this image is misleading. The OECD countries remain more diverse in their distributions of labor earnings and disposable income than they are in their distributions of market income. The larger and persistent cross-national variation in the distributions of work-related earnings and disposable income is attributable to the role of political actors (such as unions and political parties) as well as economic institutions. The way in which political parties are able to pursue their goals varies across forms of income. Political parties' capacities to shape the distribution of labor earnings is contingent on the degree of wage-bargaining coordination. In turn, political parties directly affect the distribution of disposable income through their choices about fiscal instruments.