across countries. This result holds even when excluding industrial countries from the sample.

> Collective bargaining per se might not be to blame either. If anything, the union wage premium is smaller in developing countries than in industrial countries. It ranges from negligible in Senegal (Terrell and Svejnar, 1989) to small in Mexico (Panagides and Patrinos, 1994). It has been argued that South Africa is an exception, in the sense that the union wage premium could be extraordinarily high in that country (Mwabu and Schultz, 2000). However, this high premium is likely to reflect self-selection, more than bargaining power. An in-depth analysis of South African labor market data suggests that the wage premium is roughly the same as in the United States (Butcher and Rouse, 2001). In fact, it is difficult to make the claim that collective bargaining is either "good" or "bad". Whether the economic activities of trade unions are associated with a better or worse economic performance very much depends on the context they operate in (World Bank, 1995; Aidt and Tzannatos, 2001).

But trade unions also play a political role, in the sense that they can influence government policy decisions. In developing countries, a large portion of the union membership is made of public sector employees. Workers in protected industries tend to be unionized as well. These two groups stand to lose from reforms such as trade liberalization, market deregulation, or privatization of state-owned enterprises. The more powerful they are, the more likely that reforms will be delayed. Once they are adopted, it is likely that they will be implemented half-heartedly. Based'on this political interpretation, figure 10 underscores the importance of dialogue with trade unions in the context of globalization, and understanding their grievances. It also implies that the payoffs to the "compensation" of those who stand to lose from globalization, for instance through severance pay packages, can be large.

On the benefits side, the same labor market interventions can be matched with indicators of inequality, such as the Gini index, or the income or consumption share of different population quintiles (Rama and Ravallion, 2001). The analysis controls for other determinants of inequality, such as educational attainment, civil liberties, financial development and many others. The results, summarized in Table 2, show that social protection policies like those usually run by social security agencies have a strong potential to reduce inequality. The regulatory framework promoted by the ILO appears to have a similar impact, which is not surprising given the high correlation between the number of conventions ratified and the share of GDP devoted to social security. Collective bargaining seems less effective at reducing inequality. Its impact is statistically significant only for the share of the second richest quintile of the population.

All of the other labor market variables considered in Table 2 fail to reduce inequality significantly. Based on the size of the estimated correlation coefficients, the number of "core" ILO conventions ratified by a country is totally ineffective. "Core" conventions refer to the abolition of forced labor, the effective elimination of child labor, nondiscrimination in the workplace, and freedom of association and the right to collective bargaining. Some of these conventions are decades old, and have been ratified over the years by many countries, both industrial and developing. More recently, all 175 members 28