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Polarization and Rising Wage Inequality: Comparing the U.S. and Germany

Author

Listed:
  • Dirk Antonczyk

    (Research Fellow, IZA, 53113 Bonn, Germany)

  • Thomas DeLeire

    (Research Fellow, IZA, 53113 Bonn, Germany
    Georgetown University, Washington DC, 20057, USA
    National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138, USA)

  • Bernd Fitzenberger

    (Research Fellow, IZA, 53113 Bonn, Germany
    School of Business and Economics, Humboldt University Berlin, Spandauer Strasse 1, 10099 Berlin, Germany
    Institute For Fiscal Studies, London WC1E 7AE, UK
    CESifo, 81679 München, Germany)

Abstract

Since the late 1970s, wage inequality has increased strongly both in the U.S. and Germany but the trends have been different. Wage inequality increased along the entire wage distribution during the 1980s in the U.S. and since the mid 1990s in Germany. There is evidence for wage polarization in the U.S. in the 1990s, and the increase in wage inequality in Germany was restricted to the top of the distribution before the 1990s. Using an approach developed by MaCurdy and Mroz (1995) to separate age, time, and cohort effects, we find a large role played by cohort effects in Germany, while we find only small cohort effects in the U.S. Employment trends in both countries are consistent with polarization since the 1990s. The evidence is consistent with a technology-driven polarization of the labor market, but this cannot explain the country specific differences.

Suggested Citation

  • Dirk Antonczyk & Thomas DeLeire & Bernd Fitzenberger, 2018. "Polarization and Rising Wage Inequality: Comparing the U.S. and Germany," Econometrics, MDPI, Open Access Journal, vol. 6(2), pages 1-33, April.
  • Handle: RePEc:gam:jecnmx:v:6:y:2018:i:2:p:20-:d:140515
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    More about this item

    Keywords

    wage inequality; polarization; international comparison; cohort study; quantile regression;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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