Rising wage inequality, returns to education and labour market institutions: Evidence from Ireland

Institutional factors and increased supply of skilled labour have been adva nced in an effort to explain why some countries have experienced smaller in creases in earnings dispersion and in returns to education than the USA and the UK. Ireland has had a highly centralized wage bargaining structure and the supply of skilled labour has increased sharply in recent years; hence, relatively little change in earnings dispersion might be expected. We comp are the distribution of earnings in Ireland in 1987 and 1994 and find a sur prisingly large growth in earnings dispersion. In addition, using a decompo sition technique, we find that much of this is accounted for by increasing returns to measured characteristics.