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Rising Wage Inequality in Germany

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Author Info
Gernandt, Johannes
Pfeiffer, Friedhelm

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Abstract

This paper investigates the evolution of wages and the recent tendency to rising wage inequality in Germany, based on the German Socio-Economic Panel (GSOEP) for 1984 to 2004. Between 1984 and 1994 the wage distribution was fairly stable. Wage inequality started to increase around 1994 in Germany for all workers and for prime age dependent male workers as well. Rising inequality is not the result of the recent rise in self-employment. In West Germany rising inequality occurred in the lower part of the wage distribution, in East Germany in the upper part of the wage distribution. While residual wage inequality accounted for two-thirds of rising wage inequality in West Germany, in East Germany price effects dominated. In West Germany the group of workers with low tenure experienced higher inequality.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 06-19.

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Date of creation: 2006
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Handle: RePEc:zbw:zewdip:4598

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Keywords: Education tenure skill composition wage inequality wage rigidity

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Find related papers by JEL classification:
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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  1. SOEP based publications
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
  2. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August. [Downloadable!] (restricted)
    Other versions:
  3. Budria, Santiago & Telhado-Pereira, Pedro, 2005. "Educational Qualifications and Wage Inequality: Evidence for Europe," MPRA Paper 91, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Rising Wage Inequality: The Role of Composition and Prices," Harvard Institute of Economic Research Working Papers 2096, Harvard - Institute of Economic Research. [Downloadable!]
    Other versions:
  5. Paul Krugman, 1994. "Past and prospective causes of high unemployment," Proceedings, Federal Reserve Bank of Kansas City, issue Jan, pages 49-98.
  6. Wolfgang Franz & Viktor Steiner, 2000. "Wages in the East German Transition Process: Facts and Explanations," German Economic Review, Blackwell Publishing, vol. 1(3), pages 241-269, 08. [Downloadable!] (restricted)
  7. Meghir, Costas & Whitehouse, Edward, 1996. "The Evolution of Wages in the United Kingdom: Evidence from Micro Data," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 1-25, January. [Downloadable!] (restricted)
  8. Eswar S. Prasad, 2004. "The Unbearable Stability of the German Wage Structure: Evidence and Interpretation," IMF Staff Papers, Palgrave Macmillan Journals, vol. 51(2), pages 7. [Downloadable!] (restricted)
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  9. Wolfgang Franz & Friedhelm Pfeiffer, 2006. "Reasons for Wage Rigidity in Germany," IZA Discussion Papers 2017, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Mario Izquierdo & Aitor Lacuesta, 2006. "Wage inequality in Spain: recent developments," Banco de España Working Papers 0615, Banco de España. [Downloadable!]
  11. Wolfgang Franz & Friedhelm Pfeiffer, 2006. "Reasons for Wage Rigidity in Germany," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 20(2), pages 255-284, 06. [Downloadable!] (restricted)
  12. Reinhard Hujer & Bernd Fitzenberger & Reinhold Schnabel & Thomas E. MaCurdy, 2001. "Testing for uniform wage trends in West-Germany: A cohort analysis using quantile regressions for censored data," Empirical Economics, Springer, vol. 26(1), pages 41-86. [Downloadable!] (restricted)
  13. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June. [Downloadable!] (restricted)
  14. Gabriela Schütz & Heinrich W. Ursprung & Ludger Woessmann, 2005. "Education Policy and Equality of Opportunity," IZA Discussion Papers 1906, Institute for the Study of Labor (IZA). [Downloadable!]
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  15. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2007. "Revisiting the German Wage Structure," IZA Discussion Papers 2685, Institute for the Study of Labor (IZA). [Downloadable!]
  16. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sebastian Gundel & Heiko Peters, 2007. "Assimilation and Cohort Effects for German Immigrants," SOEPpapers 64, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
  2. Heiko Peters, 2008. "Development of Wage Inequality for Natives and Immigrants in Germany : Evidence from Quantile Regression and Decomposition," SOEPpapers 113, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
  3. Gernandt, Johannes & Maier, Michael & Pfeiffer, Friedhelm & Rat-Wirtzler, Julie, 2006. "Distributional effects of the high school degree in Germany," ZEW Discussion Papers 06-88, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  4. Werner Eichhorst & Lutz C. Kaiser, 2006. "The German Labor Market: Still Adjusting Badly?," IZA Discussion Papers 2215, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Friedhelm Pfeiffer & Karsten Reuß, 2007. "Age-Dependent Skill Formation and Returns to Education: Simulation Based Evidence," IZA Discussion Papers 2882, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Gebel, Michael & Pfeiffer, Friedhelm, 2007. "Educational expansion and its heterogeneous returns for wage workers," ZEW Discussion Papers 07-010, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  7. Harald Hagemann & Ralf Rukwid, 2007. "Perspectives of Workers with Low Qualifications in Germany under the Pressures of Globalization and Technical Progress," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 291/2007, Department of Economics, University of Hohenheim, Germany. [Downloadable!]
  8. Eisenhauer, Philipp & Pfeiffer, Friedhelm, 2008. "Assessing Intergenerational Earnings Persistence Among German Workers," ZEW Discussion Papers 08-014, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  9. Pfeiffer, Friedhelm & Reuß, Karsten, 2007. "Age-dependent Skill Formation and Returns to Education," ZEW Discussion Papers 07-015, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  10. Jirjahn, Uwe & Kraft, Kornelius, 2008. "Teamwork and Intra-Firm Wage Dispersion among Blue-Collar Workers," IZA Discussion Papers 3291, Institute for the Study of Labor (IZA). [Downloadable!]
  11. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2007. "Revisiting the German Wage Structure," IZA Discussion Papers 2685, Institute for the Study of Labor (IZA). [Downloadable!]
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