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Earnings Inequality in Germany

In: Differences and Changes in Wage Structures

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  • Katharine G. Abraham
  • Susan Houseman

Abstract

Recent studies have documented the growth of earnings inequality in the United States during the 1980s. In contrast to these studies' findings, our analysis of micro data for the former West Germany yields virtually no evidence of growth in earnings inequality over the same period. Between 1978 and 1988, a reduction in the dispersion of earnings among workers in the bottom half of the earnings distribution led to a narrowing of the overall dispersion of earnings in Germany. Earnings differentials across education and age groups remained roughly stable, and there was no general widening of earnings differentials within either education or age groups. German wage setting institutions tend to limit earnings differentials across groups of workers, but differences in wage setting institutions cannot fully explain the differences between trends in earnings inequality in Germany and those in the United States. Both the high quality of the training received by non-college-bound German youth and the fact that the growth of the highly-educated work force did not decelerate in Germany as it did in the United States seem likely to have contributed to these differences.
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Suggested Citation

  • Katharine G. Abraham & Susan Houseman, 1995. "Earnings Inequality in Germany," NBER Chapters,in: Differences and Changes in Wage Structures, pages 371-404 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:7863
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    References listed on IDEAS

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    1. Franke, Siegfried Franz, 1983. "Der Einfluss von Lohnhöhe und Lohnstruktur auf Beschäftigungsvolumen und -struktur," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 63(1), pages 29-34.
    2. Fels, Joachim & Gundlach, Erich, 1990. "More evidence on the puzzle of interindustry wage differentials: the case of West Germany," Kiel Working Papers 400, Kiel Institute for the World Economy (IfW).
    3. Richard B. Freeman, 1975. "Overinvestment in College Training?," Journal of Human Resources, University of Wisconsin Press, vol. 10(3), pages 287-311.
    4. Rainer Thiehoff, "undated". "Lohnnivellierung und qualifikatorische Arbeitslosigkeitsstruktur - Eine theoretische und empirische Analyse der Beziehungen zwischen der qualifikatorischen Lohn- und Arbeitslosigkeitsstruktur," List Monographien 009, List Gesellschaft e.V..
    5. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Chapters,in: NBER Macroeconomics Annual 1992, Volume 7, pages 239-300 National Bureau of Economic Research, Inc.
    6. McKinley L. Blackburn & David E. Bloom & Richard B. Freeman, 1989. "The Declining Economic Position of Less-Skilled American Males," NBER Working Papers 3186, National Bureau of Economic Research, Inc.
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    8. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    9. Soltwedel, Rüdiger & Bothe, Adrian & Hoffmeyer, Martin & Laaser, Claus-Friedrich & Lammers, Konrad & Merz, Monika & Reuter, Dieter, 1990. "Regulierungen auf dem Arbeitsmarkt der Bundesrepublik," Open Access Publications from Kiel Institute for the World Economy 418, Kiel Institute for the World Economy (IfW).
    10. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 82(3), pages 371-392, June.
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    JEL classification:

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

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