Unpacking the green wage premium: The role of observable and unobservable characteristics in green job wages

Sergey Volozhenin, Rita Sousa and João Cerejeira
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Sergey Volozhenin: NIPE
Rita Sousa: NIPE
João Cerejeira: University of Minho, NIPE, and CIPES

Portugal Stata Conference 2026 from Stata Users Group

Abstract: As economies pursue environmental transitions, the labor market effects of green jobs are of growing interest to both researchers and policymakers. This presentation investigates the green wage premium in Portugal using detailed longitudinal-linked employer-employee data from 2010 to 2019. We quantify the wage differentials between green and nongreen jobs and disentangle the roles of both observable characteristics (for example, education, tenure, firm size) and unobservable factors (for example, individual abilities, firm-specific effects). Our results show that workers in green jobs earn, on average, between 20% and 50% more than those in nongreen jobs; however, this gap narrows to 3%–7% when controlling for covariates. Using fixed effects and structural wage decompositions, we find that green jobs offer lower returns to unobservable abilities, suggesting that they rely more on formal qualifications and structured task content. These patterns persist in a robustness check using a sample of displaced workers, mitigating concerns about endogenous matching. Our findings underscore the importance of skill-based wage structures in green labor markets and provide policy-relevant insights for managing the reallocation of labor during environmental transitions.

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