Workplace Heterogeneity and the Rise of West German Wage Inequality

Jörg Heining, David Card and Patrick Kline

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: We study the role of establishment-specific wage premiums in generating recent increases in West German wage inequality. Models with additive fixed effects for workers and establishments are fit in four sub-intervals spanning the period from 1985 to 2009. We show that these models provide a good approximation to the wage structure and can explain nearly all of the dramatic rise in West German wage inequality. Our estimates suggest that the increasing variability of West German wages has arisen from a combination of rising heterogeneity between workers, rising variability in the wage premiums at different establishments, and increasing assortativeness in the assignment of workers to plants. In contrast, the idiosyncratic job-match component of wage variation is small and stable over time. Decomposing changes in mean wages between different education groups, occupations, and industries, we and that increasing plant-level heterogeneity and rising assortativeness in the assignment of workers to establishments explain a large share of the rise in inequality along all three dimensions.

JEL-codes: J01 J31 J40 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1008)

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Related works:
Journal Article: Workplace Heterogeneity and the Rise of West German Wage Inequality (2013)
Working Paper: Workplace Heterogeneity and the Rise of West German Wage Inequality (2013)
Working Paper: Workplace heterogeneity and the rise of West German wage inequality (2012)
Working Paper: Workplace Heterogeneity and the Rise of West German Wage Inequality (2012)
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