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Polarization and Rising Wage Inequality: Comparing the U.S. and Germany

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Author Info

  • Antonczyk, Dirk

    ()
    (Deloitte FAS LLP)

  • DeLeire, Thomas

    ()
    (Georgetown University)

  • Fitzenberger, Bernd

    ()
    (University of Freiburg)

Abstract

This paper compares trends in wage inequality in the U.S. and Germany using an approach developed by MaCurdy and Mroz (1995) to separate age, time, and cohort effects. Between 1979 and 2004, wage inequality increased strongly in both the U.S. and Germany but there were various country specific aspects of this increase. For the U.S., we find faster wage growth since the 1990s at the top (80% quantile) and the bottom (20% quantile) compared to the median of the wage distribution, which is evidence for polarization in the U.S. labor market. In contrast, we find little evidence for wage polarization in Germany. Moreover, we see a large role played by cohort effects in Germany, while we find only small cohort effects in the U.S. Employment trends in both countries are consistent with polarization since the 1990s. We conclude that although there is evidence in both the U.S. and Germany which is consistent with a technology-driven polarization of the labor market, the patterns of trends in wage inequality differ strongly enough that technology effects alone cannot explain the empirical findings.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4842.

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Length: 52 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:iza:izadps:dp4842

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Keywords: wage inequality; polarization; international comparison; cohort study; quantile regression;

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References

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Citations

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Cited by:
  1. Thomas Beissinger & Nathalie Chusseau & Joel Hellier, 2014. "Offshoring, employment, labour market reform and inequality: Modelling the German experience," Working Papers 330, ECINEQ, Society for the Study of Economic Inequality.
  2. Autor, David, 2013. "The "Task Approach" to Labor Markets: An Overview," IZA Discussion Papers 7178, Institute for the Study of Labor (IZA).
  3. Wielandt, Hanna & Senftleben, Charlotte, 2012. "The Polarization of Employment in German Local Labor Markets," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62063, Verein für Socialpolitik / German Economic Association.
  4. Michelle Rendall & Franziska J. Weiss, 2014. "Employment polarization and the role of the apprenticeship system," ECON - Working Papers 141, Department of Economics - University of Zurich.
  5. Kohn, Karsten & Antonczyk, Dirk, 2011. "The Aftermath of Reunification: Sectoral Transition, Gender, and Rising Wage Inequality in East Germany," IZA Discussion Papers 5708, Institute for the Study of Labor (IZA).
  6. Stephani, Jens, 2013. "Does it matter where you work? : employer characteristics and the wage growth of low-wage workers and higher-wage workers," IAB Discussion Paper 201304, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  7. Henseke, Golo & Tivig, Thusnelda, 2013. "Alterung in Berufen: Der Beitrag ökonomischer Einflüsse," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80001, Verein für Socialpolitik / German Economic Association.
  8. Hugo Rojas-Romagosa, 2011. "Wage inequality in trade-in-tasks models," CPB Discussion Paper 196, CPB Netherlands Bureau for Economic Policy Analysis.
  9. Dlugosz, Stephan, 2011. "Give missings a chance: Combined stochastic and rule-based approach to improve regression models with mismeasured monotonic covariates without side information," ZEW Discussion Papers 11-013, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. Dauth, Wolfgang, 2013. "The Magnitude and Causes of Job Polarization: A Local Labor Market Approach," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79858, Verein für Socialpolitik / German Economic Association.
  11. Martina Bisello, 2013. "Job polarization in Britain from a task-based perspective.Evidence from the UK Skills Surveys," Discussion Papers 2013/160, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  12. Rita Asplund & Erling Barth & Per Lundborg & Kjersti Misje Nilsen, 2011. "Polarization of the Nordic Labour Markets," Finnish Economic Papers, Finnish Economic Association, vol. 24(2), pages 87-110, Autumn.
  13. Heshmati, Almas & Kim, Jungsuk, 2014. "A Survey of the Role of Fiscal Policy in Addressing Income Inequality, Poverty Reduction and Inclusive Growth," IZA Discussion Papers 8119, Institute for the Study of Labor (IZA).
  14. Markus M. Grabka & Ursina Kuhn, 2012. "The Evolution of Income Inequality in Germany and Switzerland since the Turn of the Millennium," SOEPpapers on Multidisciplinary Panel Data Research 464, DIW Berlin, The German Socio-Economic Panel (SOEP).
  15. Franz, Wolfgang, 2013. "Die Arbeitsmarktanalyse in der wirtschaftspolitischen Beratung des Sachverständigenrates," ZEW Discussion Papers 13-074, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  16. Mueller, Kai-Uwe & Steiner, Viktor, 2013. "Behavioral effects of a federal minimum wage and income inequality in Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79784, Verein für Socialpolitik / German Economic Association.
  17. Karsten Kohn & Dirk Antonczyk, 2013. "The aftermath of reunification," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 21(1), pages 73-110, 01.
  18. Charlotte Senftleben & Hanna Wielandt, 2012. "The Polarization of Employment in German Local Labor Markets," SFB 649 Discussion Papers SFB649DP2012-013, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

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