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Dynamics in transitory and permanent variation of wages in Germany

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  • Myck, Michal
  • Ochmann, Richard
  • Qari, Salmai

Abstract

We employ covariance structure models to decompose the cross-sectional variance of male wages in Germany into its permanent and transitory parts. We find that the steep growth of cross-sectional inequality during the early 2000s is predominantly driven by transitory factors.

Suggested Citation

  • Myck, Michal & Ochmann, Richard & Qari, Salmai, 2011. "Dynamics in transitory and permanent variation of wages in Germany," Economics Letters, Elsevier, vol. 113(2), pages 143-146.
    • Handle: RePEc:eee:ecolet:v:113:y:2011:i:2:p:143-146
    DOI: 10.1016/j.econlet.2011.06.014
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    References listed on IDEAS

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    1. Gernandt Johannes & Pfeiffer Friedhelm, 2007. "Rising Wage Inequality in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 227(4), pages 358-380, August.
    2. 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.
    3. Myck, Michal & Ochmann, Richard & Qari, Salmai, 2008. "Dynamics of Earnings and Hourly Wages in Germany," IZA Discussion Papers 3751, Institute of Labor Economics (IZA).
    4. Magnus Gustavsson, 2007. "The 1990s rise in Swedish earnings inequality -- persistent or transitory?," Applied Economics, Taylor & Francis Journals, vol. 39(1), pages 25-30.
    5. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January.
    6. Dickens, Richard, 2000. "The Evolution of Individual Male Earnings in Great Britain: 1975-95," Economic Journal, Royal Economic Society, vol. 110(460), pages 27-49, January.
    7. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(2), pages 843-881.
    8. Daly, Mary C. & Valletta, Robert G., 2008. "Cross-national trends in earnings inequality and instability," Economics Letters, Elsevier, vol. 99(2), pages 215-219, May.
    9. Robert A. Moffitt & Peter Gottschalk, 2002. "Trends in the Transitory Variance of Earnings in the United States," Economic Journal, Royal Economic Society, vol. 112(478), pages 68-73, March.
    10. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
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    Cited by:

    1. Coban, Mustafa, 2017. "Wage mobility, wage inequality, and tasks: Empirical evidence from Germany, 1984-2014," Discussion Paper Series 139, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    2. Thomsen, Stephan L, 2018. "Die Rolle der Computerisierung und Digitalisierung für Beschäftigung und Einkommen," Hannover Economic Papers (HEP) dp-645, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.

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    More about this item

    Keywords

    Variance decomposition; Wage inequality; Wage dynamics;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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