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More evidence on the puzzle of interindustry wage differentials: the case of West Germany

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  • Fels, Joachim
  • Gundlach, Erich

Abstract

In West Germany workers with similar skills earn different wages according to the industry in which they are employed. This finding is no surprise given the institutional rigidities of the West German labor market. But the similarity of the interindustry wage structures in West Germany and in the U.S. points to a puzzle since these countries exhibit totally different labor market institutions. Typical high-wage industries in both countries are motor vehicles and petroleum refining. Furthermore, large correlations of wages between any two qualification groups of workers within an industry in both countries cannot easily be explained by standard neoclassical labor market theories. Once alternative theories are accepted, the economic policy prescriptions regarding the labor market become very different.

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 400.

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Date of creation: 1990
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Handle: RePEc:kie:kieliw:400

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  1. Toyoda, Toshihisa, 1974. "Use of the Chow Test under Heteroscedasticity," Econometrica, Econometric Society, vol. 42(3), pages 601-08, May.
  2. 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.
  3. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
  4. Thaler, Richard H, 1989. "Interindustry Wage Differentials," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 181-93, Spring.
  5. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-94, September.
  6. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
  7. Schmidt, Peter & Sickles, Robin, 1977. "Some Further Evidence on the Use of the Chow Test under Heteroskedasticity," Econometrica, Econometric Society, vol. 45(5), pages 1293-98, July.
  8. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Working Papers 1906, National Bureau of Economic Research, Inc.
  9. Lucas, Robert E, Jr, 1980. "Methods and Problems in Business Cycle Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(4), pages 696-715, November.
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Cited by:
  1. Katharine G. Abraham & Susan N. Houseman, 1993. "Earnings Inequality in Germany," NBER Working Papers 4541, National Bureau of Economic Research, Inc.
  2. PaquƩ, Karl-Heinz, 1991. "Structural wage rigidity in West Germany 1950 - 1989: Some new econometric evidence," Kiel Working Papers 489, Kiel Institute for the World Economy.
  3. Carl Campbell, 1991. "Tests of efficiency wage theory and contract theory with disaggregated data from the U.S," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(1), pages 98-118, March.

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