Labour market reforms, institutional complementarity and the insider–outsider wage gap.

This article examines how institutional reforms in industrial relations, employment protection legislation (EPL), and unemployment benefits influence wage differentials between permanent (insiders) and temporary (outsiders) workers across 25 European countries from 2004 to 2020. Using a two-step multilevel approach with fixed effects on EU-SILC micro-data and complementary macro-data, the study finds that insider-oriented institutions—such as strict EPL for permanent workers, high collective bargaining coverage, and coordinated unions—tend to widen the wage gap by strengthening insiders' bargaining power. The impact of these institutions varies along the wage distribution, being more pronounced at the lower end, and their effects are mutually reinforcing depending on the institutional context. The findings highlight that labour market dualism and wage inequalities are shaped by the interplay of institutional configurations rather than isolated reforms, suggesting that policy trends toward flexibilization risk exacerbating insider–outsider divides by increasing labour market segmentation by contract type.