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Firm Specific Wage Spread in Germany - Decomposition of regional differences in inter firm wage dispersion

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Author Info
Bernd Görzig
Martin Gornig
Axel Werwatz

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Abstract

The purpose of this paper is to sort out firm-related differences from effects that result from different economic structures. A non-parametric decomposition is used to analyse firm level difference between the wage spread in the two major regions of unified Germany. If firm-specific effects explain wage dispersion between firms, a decomposition of the wage dispersion between firms is necessary. The decomposition can help to find out, whether the economy-wide results for different regions are due to the composition of the regional economies by industries and firm-size, or whether the differences are due to firm-specific influences, like distinctions in market power. For Germany, a considerable part of the difference in the wage spread between the East and the West can be explained by different economic structures. However, by far the greater part of the difference in the wage spread between firms in the two parts of the country results from lower wages paid by firms of the same type in East Germany compared with their counterparts in West Germany.

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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2006-045.

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Length: 30 pages
Date of creation: May 2006
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Handle: RePEc:hum:wpaper:sfb649dp2006-045

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Related research
Keywords: Productivity Wage Differentiation Wage Spread Firm Wage Levels Wage Sharing Non Parametric Analysis Decomposition

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Find related papers by JEL classification:
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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  9. Matthias Paustian & Christian Stoltenberg, 2006. "Optimal Interest Rate Stabilization in a Basic Sticky-Price Model," SFB 649 Discussion Papers SFB649DP2006-072, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
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