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The political sources of labor market dualism in post-industrial democracies, 1975–2011

Duane Swank

Keywords: wage dispersion; labor market policy; labor and business organization; partisan politics; social democracy

Increases in wage inequality and atypical employment have occurred across post-industrial economies in recent decades. Technological change, globalization, the employment shift to services, and the decentralization of collective bargaining are commonly cited as causes. I argue that where social democratic parties govern, and where employers and labor remain highly organized, labor market dualism is mitigated. This should hold because the organizational scope, centralization, and policymaking integration of labor and capital facilitates the creation of post-industrial political coalitions necessary for egalitarian policymaking and implementation by progressive governments, and organizationally blunts insider politics by sectorally fragmented actors and excessive rent-seeking by narrow interest groups. I draw on 1975 to 2011 annual data from 18 post-industrial democracies and estimate models of labor market policy and performance. Findings support the core argument: social democratic government has significant egalitarian impacts on policies and performance at high levels of labor and employer organization. Some conventional explanations of dualism also receive support: technological change, trade penetration by developing countries, and deindustrialization are associated with inegalitarian outcomes.

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