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Are Wages in Southern Europe More Flexible? The Effects of Cohort Size on European Earnings

Author

Listed:
  • Brunello, Giorgio

    () (University of Padova)

  • Lauer, Charlotte

    ()

Abstract

We exploit the cross-country and time variation in the demographics and education structure in 11 European countries to study how cohort size has affected real earnings in Europe. When we pool the data of all countries, we find that cohort size has a negative and statistically significant effect on the earnings of the older cohorts – aged between 35 and 54 – but no statistically significant effect on the earnings of younger cohorts – aged 20 to 34. The negative effect of cohort size on earnings is completely driven by Southern European countries, a result which we relate to institutional differences. While the share of individuals aged 20 to 34 in the population has declined in the EU11 by 10.20 percent between 1991 and 2001, the share of individuals aged 35 and 54 has increased by 9.32 percent. Our estimates suggest that, as a consequence of these significant demographic changes, the real earnings of the younger cohorts have increased on average by a tiny 0.06 percent, while the earnings of the older cohorts have declined by 0.93 percent, a modest variation.

Suggested Citation

  • Brunello, Giorgio & Lauer, Charlotte, 2004. "Are Wages in Southern Europe More Flexible? The Effects of Cohort Size on European Earnings," IZA Discussion Papers 1299, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1299
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    Cited by:

    1. Elena Giarda, 2008. "The worsening of wage expectations in Italy: a study based on administrative data," International Journal of Manpower, Emerald Group Publishing, vol. 29(1), pages 64-87, March.
    2. Alfonso Rosolia & Roberto Torrini, 2007. "The generation gap: relative earnings of young and old workers in Italy," Temi di discussione (Economic working papers) 639, Bank of Italy, Economic Research and International Relations Area.
    3. Guido Schwerdt & Jarkko Turunen, 2007. "Growth In Euro Area Labor Quality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(4), pages 716-734, December.
    4. Biagi, Federico & Lucifora, Claudio, 2005. "Demographic and Education Effects on Unemployment in Europe: Economic Factors and Labour Market Institutions," IZA Discussion Papers 1806, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    Europe; cohort size; wages;

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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