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POLITICAL AGENCY AND INSTITUTIONS : EXPLAINING THE INFLUENCE OF LEFT GOVERNMENT AND WAGE BARGAINING ON INEQUALITY

In this paper I argue that to understand the relationship between partisan government and any economic outcome two fundamental things need to be done: to separate the effects of partisanship on policy and of policy on the economy; and to assess the influence of political agency once the mediating role of institutions is accounted for. The main goal of this paper is to explore the relationship between government partisanship, policy and inequality at the lower half of the wage distribution. The analysis is motivated by a puzzling finding in previous work: the absence of government partisanship effects on inequality. I explain why some institutions mitigate (or magnify) the influence of government partisanship. By explicitly exploring the determinants of policy and inequality, my paper presents a more accurate analysis of how governments promote redistribution. I test my claims with data from 16 OECD countries from 1973 to 1995. 2 It is well known that wage inequality has increased dramatically in the United States over the last three decades. From 1973 to 1998, the hourly earnings of a full-time worker in the 90th percentile of the American distribution (someone whose earnings exceeded those of 90 per cent of all workers) relative to a worker in the tenth percentile grew by 25 per cent, and the corresponding figure for men only was nearly 40 per cent. Wage inequality has increased in most other OECD countries as well, but the extent of this phenomenon varies a great deal. Cross-national differences in levels of wage inequality, in fact, remain as great as they were in the 1970s. In the US, the worker in the 90th percentile earned 4.63 times as much as the worker in the tenth percentile in 1996. In Sweden, on the other hand, a worker in the 90th percentile earned only 2.27 times as much as the worker in the tenth percentile. Inequality is frequently invoked as an explanation of a number of crucial issues in political science. It is often considered a determinant of processes as diverse as the decline Lichbach 1989 for a review). At the same time, recent work by labor economists demonstrates that supply and demand factors alone cannot account for cross-national and Smeeding 1997). Most analysts would agree that political factors influence inequality in fundamental ways. Because inequality has political determinants and political consequences, it deserves to be a central concern of comparative political economy. Issues having …