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Inter-Industry Wage Differentials In EU Countries: What Do Cross-Country Time Varying Data Add to the Picture?

  • Philip Du Caju
  • Gábor Kátay
  • Ana Lamo
  • Daphne Nicolitsas
  • Steven Poelhekke

This paper documents the existence and main patterns of inter-industry wage differentials across a large number of industries for eight EU countries at two points in time (in general 1995 and 2002) and explores possible explanations for these patterns. The analysis uses the European Structure of Earnings Survey, an internationally harmonised matched employer-employee data set, to estimate industry wage differentials conditional on a rich set of employee, employer, and job characteristics. After investigating the possibility that unobservable employee characteristics lie behind conditional wage differentials, a hypothesis which cannot be accepted, the paper investigates the role of institutional, industry structure, and industry performance characteristics in explaining industry wage differentials. The results suggest that inter-industry wage differentials could reflect efficiency wages or rent-sharing mechanisms and that rent-sharing is more likely in industries with firm-level collective agreements and with higher-collective agreement coverage. (JEL: J31, J41, J51) (c) 2010 by the European Economic Association.

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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 8 (2010)
Issue (Month): 2-3 (04-05)
Pages: 478-486

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Handle: RePEc:tpr:jeurec:v:8:y:2010:i:2-3:p:478-486
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  1. Philip Du Caju & François Rycx & Ilan Tojerow, 2011. "Inter-industry wage differentials: How much does rent sharing matter?," ULB Institutional Repository 2013/138898, ULB -- Universite Libre de Bruxelles.
  2. Robert Gibbons & Lawrence F. Katz & Thomas Lemieux & Daniel Parent, 2002. "Comparative Advantage, Learning, and Sectoral Wage Determination," CIRANO Working Papers 2002s-35, CIRANO.
  3. Luisa Zanchi, . "Cross-Country Comparisons of the Inter-Industry Wage Structure: Empirical Evidence with the ‘Luxembourg Income Study' Data-Bank," Discussion Papers 95/18, Department of Economics, University of York.
  4. Du Caju, Philip & Gautier, Erwan & Momferatou, Daphne & Ward-Warmedinger, Melanie E., 2008. "Institutional Features of Wage Bargaining in 23 European Countries, the US and Japan," IZA Discussion Papers 3867, Institute for the Study of Labor (IZA).
  5. Martins, Pedro S., 2004. "Industry wage premia: evidence from the wage distribution," Economics Letters, Elsevier, vol. 83(2), pages 157-163, May.
  6. Alan Carruth & William Collier & Andy Dickerson, 2004. "Inter-industry Wage Differences and Individual Heterogeneity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 811-846, December.
  7. Alan B. Krueger & Lawrence H. Summers, 1986. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc.
  8. Gibbons, Robert & Katz, Lawrence F, 1992. "Does Unmeasured Ability Explain Inter-industry Wage Differentials?," Review of Economic Studies, Wiley Blackwell, vol. 59(3), pages 515-35, July.
  9. Christopoulou, Rebekka & Vermeulen, Philip, 2008. "Markups in the euro area and the US over the period 1981-2004: a comparison of 50 sectors," Working Paper Series 0856, European Central Bank.
  10. Goux, Dominique & Maurin, Eric, 1999. "Persistence of Interindustry Wage Differentials: A Reexamination Using Matched Worker-Firm Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 492-533, July.
  11. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Sciences Po publications info:hdl:2441/dc0ckec3fcb, Sciences Po.
  12. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
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  14. Iga Magda & François Rycx & Ilan Tojerow & Daphné Valsamis, 2011. "Wage differentials across sectors in Europe: An east-west comparison," ULB Institutional Repository 2013/138897, ULB -- Universite Libre de Bruxelles.
  15. Martine Druant & Silvia Fabiani & Gabor Kezdig & Ana Lamo & Fernando Martins & Roberto Sabbatini, 2009. "How are firms' wages and prices linked: survey evidence in Europe," Temi di discussione (Economic working papers) 725, Bank of Italy, Economic Research and International Relations Area.
  16. Postel-Vinay & Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Working Papers 155908, Institut National de la Recherche Agronomique, France.
  17. Richard B. Freeman, 2007. "Labor Market Institutions Around the World," NBER Working Papers 13242, National Bureau of Economic Research, Inc.
  18. Kevin Reilly & Luisa Zanchi, 2002. "Industry Wage Differentials: How Many, Big and Significant Are They?," Labor and Demography 0209001, EconWPA.
  19. Erkan Erdil & I. Hakan Yetkiner, 2001. "A comparative analysis of inter-industry wage differentials: industrialized versus developing countries," Applied Economics, Taylor & Francis Journals, vol. 33(13), pages 1639-1648.
  20. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
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