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Wage compression and employment in Europe: First evidence from the structure of earnings survey 2002

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  • Gilles Mourre

Abstract

This paper aims at examining wage compression in Europe using the publicly available data on wages drawn from the Structure of Earnings Survey 2002. By wage compression, it is meant here that the difference in productivity across workers or firms is only partly reflected by the difference in wages. The paper specifically considers the existence of wage compression both across occupations and levels of education by means of cross-sectional econometric analysis. Looking at wage compression across occupations, robust evidence gives some support to the conventional view that there is a compressed wage distribution in Europe. Wage compression mainly occurs in continental and southern countries, whilst no compression is detected in Anglo-Saxon countries and mixed evidence is found in Northern European countries.

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Bibliographic Info

Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 232.

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Length: 35 pages
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:euf:ecopap:0232

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Keywords: Wage structure; wage differentials by skills; demand for labour; European Union; wage compression; Mourre;

References

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  1. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
  2. Juan F. Jimeno & Diego Rodríguez-Palenzuela, 2003. "Youth Unemployment in the OECD: Demographic Shifts, Labour Market Institutions and Macroeconomic Shocks," Economics Working Papers 019, European Network of Economic Policy Research Institutes.
  3. Luca Nunziata, 2005. "Institutions and Wage Determination: a Multi-country Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(4), pages 435-466, 08.
  4. Winfried Koeniger & Marco Leonardi & Luca Nunziata, 2007. "Labor Market Institutions and Wage Inequality," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(3), pages 340-356, April.
  5. bertola, G. & Rogerson, R., 1996. "Institutions and Labor Reallocation," Papers 272, Banca Italia - Servizio di Studi.
  6. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  7. Alan Manning, 1994. "How do we Know that Real Wages are Too High?," CEP Discussion Papers dp0195, Centre for Economic Performance, LSE.
  8. Daron Acemoglu & Jorn-Steffen Pischke, 1998. "The Structure of Wages and Investment in General Training," NBER Working Papers 6357, National Bureau of Economic Research, Inc.
  9. Rebitzer, James B. & Taylor, Lowell J., 1995. "The consequences of minimum wage laws Some new theoretical ideas," Journal of Public Economics, Elsevier, vol. 56(2), pages 245-255, February.
  10. Bentolila Samuel & Saint-Paul Gilles, 2003. "Explaining Movements in the Labor Share," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-33, October.
  11. Giuseppe Bertola & Francine D. Blau & Lawrence M. Kahn, 2002. "Labor Market Institutions and Demographic Employment Patterns," NBER Working Papers 9043, National Bureau of Economic Research, Inc.
  12. Michael Coelli & Jerome Fahrer & Holly Lindsay, 1994. "Wage Dispersion and Labour Market Institutions: A Cross Country Study," RBA Research Discussion Papers rdp9404, Reserve Bank of Australia.
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  14. Lindquist, Matthew J., 2005. "The welfare costs of union wage compression," European Economic Review, Elsevier, vol. 49(3), pages 639-658, April.
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Cited by:
  1. Bernard Gazier, 2007. "“Making transitions pay” : The “Transitional labour markets” approach to “Flexicurity"," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00186363, HAL.
  2. John Hassler & José Vicente Rodríguez Mora & Joseph Zeira, 2003. "Inequality and Mobility," Working Papers 23, Barcelona Graduate School of Economics.
  3. Luis Santos-Pinto, 2011. "Labor Market Signaling and Self-Confidence: Wage Compression and the Gender Pay Gap," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 11.07, Université de Lausanne, Faculté des HEC, DEEP.
  4. Michel Dumont, 2008. "Working Paper 22-08 - Wages and employment by level of education and occupation in Belgium," Working Papers 0822, Federal Planning Bureau, Belgium.

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