Income Inequality and Workers’ Powerlessness in Selected OECD Countries

Abstract:

Our goal is to show the effects of “elitization” on income inequality in affluent countries over the last two decades. By applying a robust regression model on a sample of twenty-one OECD countries, we observe that a high concentration of wealth by the richest “1%” of the population results in reducing the impact of trade unions on income redistribution through political institutions. Insufficient redistribution can be interpreted not only as the elites’ control over the resources that influence public policy and opinion, but also as affecting the evolutionary path of the economy. Moreover, this influence emphasizes the importance of traditional institutions and serves as an inspiration to reconsider the established social consensus regarding the welfare state.

Keywords:

• elites
• inequality
• redistribution
• trade unions

JEL Classification Codes:

• B52
• D31
• D33
• D63

Notes

¹ A similar econometric strategy in analyzing the impact of institutional quality on capital flows is applied by Hannah Shell (2014).

² Due to the page limit, we have to omit the results of the robustness tests here, with the exception of the final test, which we present along with the estimates of a baseline model. The complete test results would be made available by the authors upon request.

³ Thorstein Veblen ([1921] 1963) pointed out the growing importance of engineers to the industrial system as well as the related diminished importance of investment bankers and other capitalists. Veblen looked at engineers as a more probable source of revolution than trade unions, but he failed to notice that engineers are more concerned with achieving professional and social status than achieving reorganization of society (Knoedler and Mayhew 1999). Distancing themselves from workers, managers and engineers have turned into professional elites.

Additional information

Notes on contributors

Kosta Josifidis

Kosta Josifidis is a full professor and Novica Supic is an associate professor, both in the Department of European and International Economics and Business at the University of Novi Sad (Serbia). The paper is written under the auspices of the project 47010, supported by the Serbian Ministry of Education and Science.

Novica Supic

Kosta Josifidis is a full professor and Novica Supic is an associate professor, both in the Department of European and International Economics and Business at the University of Novi Sad (Serbia). The paper is written under the auspices of the project 47010, supported by the Serbian Ministry of Education and Science.