The interdependence between personal
and functional income distribution: the European case
During the last decades the most advanced European countries (EU-15) have experienced a parallel evolution towards a fall in the labour share and a rise in the wage inequality. A common consequence of these trends was to mainly hit the low-skill workers’ wages and jobs. This outcome, however, should not been attributed only to harsher competition in international markets. This paper highlights that the slight recovery of the labour share which has occurred at the turn of the century in some EU-15 economies should be traced back to reforms in the labour market and in welfare benefits. The institutional constraint impinging on the technological choices of the firms was lessened, and the employment rate thus increased.