Abstract:

This study examines the effects of cross-country institutional differences on wage and income inequality through the social welfare regimes. In the literature, there are numerous studies investigating the impact of labour market institutions on inequality. However, there are relatively few studies examining whether there is a variation in inequality across different social welfare regimes. In fact, since the classifications of social welfare regimes are also based on institutions, it can be presumed a priori that different welfare regimes will create different levels of inequality. Using Esping-Andersen and Leibfried's classification of welfare regimes, this study employs panel data analysis to examine the impact of welfare regimes on inequality during two different periods: 1970-2015 and 1990-2015. The research findings indicate that both wage and income inequality are significantly lower in Social Democratic welfare regimes compared to other welfare regimes, while inequality is higher in liberal and Southern European welfare regimes. Consequently, countries' social welfare regimes are determinants of inequality, with lower levels of inequality observed in universalistic regimes, and higher levels in residual regimes.

Keywords: