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Divided We Stand

Why Inequality Keeps Rising

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In the three decades to the recent economic downturn, wage gaps widened and household income inequality  as measured by GINI increased in a large majority of OECD countries. This occurred even when countries were going through a period of sustained economic and employment growth. This report analyses the major underlying forces behind these developments. It examines to which extent economic globalisation, skill-biased technological progress and institutional and regulatory reforms have had an impact on the distribution of earnings. The report further provides evidence of how changes in family formation and household structures have altered household earnings and income inequality. And it documents how tax and benefit systems have changed in the ways they redistribute household incomes. The report discusses which policies are most promising to counter increases in inequalities and how the policy mix can be adjusted when public budgets are under strain.

"Analyses rely on simple statistical techniques that are accessible to a large readership... the graphic and charts are of great help to gain a quick visual grasp of the various issues addressed."

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The Impact of Economic Globalisation and Changes in Policies and Institutions on Rising Earnings Inequality

This chapter analyses possible causes of the increase in wage inequality among fulltime workers recorded in OECD countries during the past 25 years. It looks at the impact of economic globalisation that has come with trade and financial integration, together with the effects of technological change and developments in the fields of product and labour market regulations and institutions. It examines the interplay between these factors and separately considers shifts in the lower and upper halves of the wage distribution. It also addresses trends in sector-based wage disparities between skilled and unskilled workers.

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