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Testing for uniform wage trends in West-Germany: A cohort analysis using quantile regressions for censored data

Author

Listed:
  • Reinhard Hujer

    (Department of Economics, Johann Wolfgang Goethe University, Mertonstraße 17, 60054 Frankfurt am Main, Germany)

  • Bernd Fitzenberger

    () (Department of Economics, University of Mannheim, 68131 Mannheim, Germany, E-Mail: Bernd.Fitzenberger@vwl.uni-mannheim.de)

  • Reinhold Schnabel

    (Department of Economics, University of Essen, Universitätsstraße 12, 45117 Essen, Germany)

  • Thomas E. MaCurdy

    (Stanford University, Department of Economics, Landau Economics Building, Stanford, CA 94305-6072, USA)

Abstract

The rise of unemployment in West Germany is often attributed to an inflexibility of the wage structure in the face of a skill bias in labor demand trends. In addition, there is concern in Germany that during the 70s and 80s unions were pursuing a too egalitarian wage policy. In a cohort analysis, we estimate quantile regressions of wages taking account of the censoring in the data. We present a new framework to describe trends in the entire wage distribution across education and age groups in a parsimonious way. We explore whether wage trends are uniform across cohorts, thus defining a macroeconomic wage trend. Our findings are that wages of workers with intermediate education levels, among them especially those of young workers, deteriorated slightly relative to both high and low education levels. Wage inequality within age-education groups stayed fairly constant. Nevertheless, the German wage structure was fairly stable, especially in international comparison. The results appear consistent with a skill bias in labor demand trends, recognizing that union wages are only likely to be binding floors for low-wage earners.

Suggested Citation

  • 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.
  • Handle: RePEc:spr:empeco:v:26:y:2001:i:1:p:41-86
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    Keywords

    wage inequality · cohort analysis · quantile regression · censoring.;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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