Wage inequality and economic growth. A reassessment of the effects of Francoist developmentalism on income distribution in Spain

Abstract

ABSTRACT The relationship between economic development and inequality has been closely examined by researchers. From the seminal work of Kuznets to the more recent work of Piketty, market forces in boom cycles, on the one hand, and institutional action, on the other, have been featured as the main drivers of change in income distribution towards more egalitarian societies. In the Spanish case, previous research has described varied processes with regard to the period of growth that followed the approval of the Stabilisation Plan during the Franco dictatorship (1959–1973). Thus, Alcaide reportedly detected a limited capacity of the developmentalist growth model to reduce inequality, which he attributed to institutional limitations. In contrast, later studies have highlighted the decline in inequality during the same period. This paper aims to investigate the effects of this growth cycle by examining the behaviour of wages in the most dynamic sector of the Spanish economy, industry. Specifically, by using the wage survey compiled by the Instituto Nacional de Estadística, the paper nuances previous research and shows how despite explosive growth, the developmentalist model and the peculiar institutional framework built within the Franco dictatorship contributed to increasing wage dispersion and income inequality in most industrial sectors.