Why Has Wage Inequality Risen Most Where Wage Shares Have Fallen Least

Most developed countries have experienced rising wage inequality and falling wage shares, which are often blamed on the same forces - globalisation, technical change, and weakening labour market institutions. This paper shows, however, that wage inequality has risen the most in those countries where wage shares have fallen the least, and vice-versa. It is difficult to plausibly account for this pattern using a range of proxies for the above and other suggested explanations. Excluding the top 1% of incomes from the wage share makes little difference to the results