Divergent Trends and Differing Causal Logics: the Role of Bargaining Coordination When Explaining Earnings Inequality across Advanced Democratic Societies

In this paper I argue that coordinated wage bargaining alters the causal logic when explaining wage inequality, in the sense that common explanatory factors have different effects given the degree of bargaining coordination. The evidence presented supports the theoretical argument. Using aggregate time-series cross-country data from 17 capitalist democracies between 1977– 1997, I show that, given uncoordinated bargaining, increases in north-south trade, resources devoted to research and development, and the share of the labor force employed in the public sector have inegalitarian effects on the wage distribution, whereas increasing unemployment and left party dominance in cabinet have negative effects on wage inequality. Unionization, on the other hand, is curvilinearly related to changes in earnings inequality. As the degree of coordination in wage formation increases these effects gradually disappear or, in some cases, change direction. Sven Oskarsson, Department of Government, Uppsala University, Box 514, SE-751 20, Uppsala, Sweden, [email protected]