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Understanding occupational wage growth

Author

Listed:
  • Adermon, Adrian

    (IFAU - Institute for Evaluation of Labour Market and Education Policy)

  • Ek, Simon

    (IFAU - Institute for Evaluation of Labour Market and Education Policy)

  • Graetz, Georg

    (University of Edinburgh)

  • Yakymovych, Yaroslav

    (Institute for Housing and Urban Research (IBF), Uppsala University)

Abstract

We jointly estimate growth in occupational wage premia as well as time-varying occupation-specific life-cycle profiles for Swedish workers 1996–2013. Our novel identification strategy is based on re-centering of life-cycle profiles around their flat spot. We document a substantial increase in between-occupation wage inequality due to differential growth in premia, and show that changes in worker composition partly counteracted this trend. The association of wage premium growth and employment growth is positive, suggesting that premium growth is predominantly driven by demand-side factors. We also find that wage growth due to occupation-specific skill acquisition was more dispersed in the early years of the sample period. Our results are robust to varying the assumed flat spot over a reasonable range, as well as to allowing for occupation-level changes in returns to cognitive and psycho-social skills. The results suggest that Swedish wage setting institutions have not prevented wages and quantities from adjusting to technological change or consumer demand shifts.

Suggested Citation

  • Adermon, Adrian & Ek, Simon & Graetz, Georg & Yakymovych, Yaroslav, 2026. "Understanding occupational wage growth," Working Paper Series 2026:12, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    • Handle: RePEc:hhs:ifauwp:2026_012
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    Keywords

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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