The Unbearable Stability of the German Wage Structure: Evidence and Interpretation

Eswar Prasad

No 2000/022, IMF Working Papers from International Monetary Fund

Abstract: This paper uses micro data from the German Socio-Economic Panel to document that the wage structure in West Germany was remarkably stable during 1984-97, with little variation over time in wage or earnings inequality between and within different skill groups. Empirical evidence suggests that this stability is attributable to institutional factors rather than market forces. The rigidity of relative wages, despite relative shifts in labor demand that favor skilled workers, has resulted in sharp declines in employment rates for unskilled workers. The microeconomic evidence is shown to have important implications for interpreting trends in wage shares, capital-labor ratios, and aggregate unemployment.

Keywords: WP; supply shock; wage inequality; Wage and earnings inequality; returns to human capital; labor market outcomes across skill groups; wage distribution; quantile regression; unskilled worker; net effect; skill price; labor market experience; wage regression; percentile differential; standard deviation; employment share; selection effect; Wages; Wage structure; Income inequality; Wage adjustments; Labor markets (search for similar items in EconPapers)
Pages: 52
Date: 2000-01-01
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Citations: View citations in EconPapers (28)

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Journal Article: The Unbearable Stability of the German Wage Structure: Evidence and Interpretation (2004)
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