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Rising Wage Inequality in Germany

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Author Info
Gernandt, Johannes
Pfeiffer, Friedhelm

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Abstract

The paper investigates the evolution of wages and wage inequality in Germany based on samples from the German Socio-Economic Panel (GSOEP) 1984 to 2005. Real gross hourly wages for prime age dependent male workers increased on average by 23 percent between 1984 and 1994 in West Germany and the wage distribution was fairly stable. Between 1994 and 2005 average wages increased by 7 percent in West Germany and 18 percent in East Germany. In this period wage inequality, measured by the ratio of the ninetieth to tenth percentile of the wage distribution, increased from 2.5 to 3.1 in West Germany and from 2.4 to 3.2 in East Germany. In West Germany rising wage inequality occurred mainly in the lower part of the wage distribution, whereas in East Germany wage inequality predominantly increased in the upper part of the wage distribution. In West Germany the group of workers with low tenure experienced higher increases in wage inequality compared to the group of workers with high tenure.

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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 [rev.].

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Date of creation: 2006
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Handle: RePEc:zbw:zewdip:6086

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Related research
Keywords: Wage Inequality; Skill Structure; Real Wages; Tenure;

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

This item is featured on the following reading lists:

  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. [Downloadable!]
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    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. Kohn, Karsten, 2006. "Rising Wage Dispersion, After All ! The German Wage Structure at the Turn of the Century," ZEW Discussion Papers 06-31, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  6. Daron Acemoglu, 2002. "Cross-Country Inequality Trends," NBER Working Papers 8832, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Paul Krugman, 1994. "Past and prospective causes of high unemployment," Proceedings, Federal Reserve Bank of Kansas City, issue Jan, pages 49-98.
    Other versions:
  8. Dinardo, J. & Fortin, N.M. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Cahiers de recherche 9406, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    Other versions:
  9. Alexandra Spitz-Oener, 2006. "Technical Change, Job Tasks, and Rising Educational Demands: Looking outside the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 235-270, April. [Downloadable!]
  10. 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)
  11. Eswar Prasad, 2000. "The Unbearable Stability of the German Wage Structure - Evidence and Interpretation," IMF Working Papers 00/22, International Monetary Fund.
  12. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier. [Downloadable!] (restricted)
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  14. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U.S. Wage Inequality: Re-Assessing the Revisionists," NBER Working Papers 11627, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Thomas Lemieux, 2002. "Decomposing changes in wage distributions: a unified approach," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 646-688, November. [Downloadable!] (restricted)
  16. Wolfgang Franz & Friedhelm Pfeiffer, 2006. "Reasons for Wage Rigidity in Germany," IZA Discussion Papers 2017, Institute for the Study of Labor (IZA). [Downloadable!]
  17. Mario Izquierdo & Aitor Lacuesta, 2006. "Wage inequality in Spain: recent developments," Banco de España Working Papers 0615, Banco de España. [Downloadable!]
  18. 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)
  19. Johannes Gernandt & Friedhelm Pfeiffer, 2006. "Einstiegslöhne bei unvollkommenen Arbeitsmärkten," Perspektiven der Wirtschaftspolitik, Blackwell Publishing, vol. 7(2), pages 147-172, 05. [Downloadable!] (restricted)
    Other versions:
  20. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  21. 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)
  22. 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)
  23. 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!]
    Other versions:
  24. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2007. "Revisiting the German Wage Structure," IZA Discussion Papers 2685, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  25. 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. Andreas Knabe & Ronnie Schöb, 2008. "Minimum Wages and their Alternatives: A Critical Assessment," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. 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!]
  3. 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!]
  4. Sommer, Mathias, 2008. "Understanding the trends in income, consumption and wealth inequality and how important are life-cycle effects?," Sonderforschungsbereich 504 Publications 08-12, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
  5. Sebastian Gundel & Heiko Peters, 2007. "Assimilation and Cohort Effects for German Immigrants," SOEPpapers 64, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
  6. Myck, Michal & Ochmann, Richard & Qari, Salmai, 2008. "Dynamics of Earnings and Hourly Wages in Germany," IZA Discussion Papers 3751, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. Bruckmeier, Kerstin & Schwengler, Barbara, 2009. "The impact of federal social policies on spatial income inequalities in Germany : empirical evidence from social security data," IAB Discussion Paper 200901, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
  8. 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!]
  9. 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!]
  10. Andreas Knabe & Ronnie Schöb, 2008. "Minimum Wage Incidence: The Case for Germany," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [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!]
    Other versions:
  12. Michael Gebel & Friedhelm Pfeiffer, 2007. "Educational Expansion and Its Heterogeneous Returns for Wage Workers," SOEPpapers 13, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
  13. 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!]
  14. Mathias Sommer, 2008. "Understanding the trends in income, consumption and wealth inequality and how important are life-cycle effects?," MEA discussion paper series 08160, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
  15. 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!]
  16. 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!]
  17. Pfeiffer, Friedhelm & Eisenhauer, Philipp, 2008. "Assessing Intergenerational Earnings Persistence Among German Workers," ZEW Discussion Papers 08-014, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  18. 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!]
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