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Skills and wage inequality in Greece: evidence from matched employer-employee data, 1995-2002

  • Rebekka Christopoulou
  • Theodora Kosma

This paper examines changes in the Greek wage distribution over 1995-2002 and the role of skill in these changes. The methodology adopted is the Machado-Mata counterfactual decomposition, which separates the part of wage changes that is due to job and workers' characteristics (composition effects) from the part due to the returns to these characteristics (price effects). We find that mean wages have not increased substantially, but wage inequality has, mostly at the upper tail of the distribution. The role of skill has been decisive. Falling tenure levels at all but the very high wage deciles, and rising education across the board, have carried much of the inequalityincreasing influence of overall composition effects. Although to a lesser extent, changes in the returns to skill have contributed to inequality by forming a U-shaped pattern along the wage distribution. This pattern is further reinforced when price-effects of skill are added together with the composition effect of tenure to produce the share of skill-effects that is responsive to market forces. Drawing on this evidence, we make a case for the routinization hypothesis.

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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 24198.

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Length: 64 pages
Date of creation: May 2009
Date of revision:
Handle: RePEc:ehl:lserod:24198
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