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Skill Wage Premia, Employment, and Cohort Effects: Are Workers in Germany All of the Same Type?

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  • Fitzenberger, Bernd

    ()
    (University of Freiburg)

  • Kohn, Karsten

    ()
    (KfW Bankengruppe)

Abstract

This paper studies the relationship between employment and wage structures in West Germany based on the IAB employment subsample 1975{1997. It extends the analytical framework of Card and Lemieux (2001) which simultaneously includes skill and age as important dimensions of heterogeneity. After having identified cohort effects in skill wage premia and in the evolution of relative employment measures, we estimate elasticities of substitution between employees in three different skill groups and between those of different age, taking account of the endogeneity of wages and employment. Compared to estimates in the related literature, we find a rather high degree of substitutability. Drawing on the estimated parameters, we simulate the magnitude of wage changes within the respective skill groups that would have been necessary to halve skill-specific unemployment rates in 1997. The required nominal wage reductions range from 8.8 to 12.2% and are the higher the lower the employees' skill level.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2185.

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Length: 50 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2185

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Keywords: labor demand; heterogeneity; age; skill; wage structure; employment; cohort effects; unemployment;

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References

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Cited by:
  1. Alfred Garloff & Carsten Pohl & Norbert Schanne, 2013. "Do small labor market entry cohorts reduce unemployment?," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 29(15), pages 379-406, September.
  2. Anna Sabadash, 2013. "ICT-induced Technological Progress and Employment: A Literature Review," JRC-IPTS Working Papers on Digital Economy, Institute of Prospective Technological Studies, Joint Research Centre 2013-07, Institute of Prospective Technological Studies, Joint Research Centre.
  3. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 124(2), pages 843-881, May.
  4. Antonczyk, Dirk & Fitzenberger, Bernd & Leuschner, Ute, 2009. "Can a Task-Based Approach Explain the Recent Changes in the German Wage Structure?," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 08-132, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Anna Sabadash, 2013. "ICT-induced Technological Progress and Employment: a Happy Marriage or a Dangerous Liaison? A Literature Review," JRC-IPTS Working Papers JRC76143, Institute for Prospective and Technological Studies, Joint Research Centre.
  6. André Mollick, 2011. "The world elasticity of labor substitution across education levels," Empirical Economics, Springer, Springer, vol. 41(3), pages 769-785, December.
  7. Schwerdt, Guido & Turunen, Jarkko, 2010. "Labor quality growth in Germany," Economics Letters, Elsevier, Elsevier, vol. 108(3), pages 280-282, September.
  8. Manacorda, Marco & Manning, Alan & Wadsworth, Jonathan, 2010. "The Impact of Immigration on the Structure of Wages: Theory and Evidence from Britain," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7888, C.E.P.R. Discussion Papers.
  9. Barbara Liberda & Joanna Tyrowicz & Magdalena Smyk, 2013. "Age-productivity patterns in talent occupations for men and women: a decomposition," Working Papers 2013-27, Faculty of Economic Sciences, University of Warsaw.
  10. Bernd Fitzenberger, 2008. "Anmerkungen zur Mindestlohndebatte: Elastizitäten, Strukturparameter und Topfschlagen," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 61(11), pages 21-27, 06.
  11. Lena Jacobi & Sandra Schaffner, 2008. "Does Marginal Employment Substitute Regular Employment? – A Heterogeneous Dynamic Labor Demand Approach for Germany," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0056, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  12. Patrick A. Puhani, 2008. "Relative Demand and Supply of Skills and Wage Rigidity in the United States, Britain, and Western Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 228(5+6), pages 573-585, December.

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