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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. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, Oxford University Press, vol. 124(2), pages 843-881.
    3. 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.
    4. 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).
    5. Magnus Gustavsson, 2007. "The 1990s rise in Swedish earnings inequality -- persistent or transitory?," Applied Economics, Taylor & Francis Journals, vol. 39(1), pages 25-30.
    6. 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.
    7. 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.
    8. 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.
    9. 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.
    10. 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.
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    Cited by:

    1. Richard Ochmann, 2016. "Distributional and welfare effects of Germany’s year 2000 tax reform: the context of savings and portfolio choice," Empirical Economics, Springer, vol. 51(1), pages 93-123, August.

    More about this item

    Keywords

    Variance decomposition; Wage inequality; Wage dynamics;

    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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