IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Capital Deepening and Wage Differentials: Germany vs. US

  • Koeniger, Winfried

    ()

    (University of St. Gallen)

  • Leonardi, Marco

    ()

    (University of Milan)

Capital deepening may affect the evolution of the wage differential between skilled and unskilled workers differently in countries with different labor market institutions. If labor market institutions raise the relative wage of unskilled workers in Germany, firms have incentives to invest relatively more into capital equipment complementary to unskilled workers. Instead in the US, where wage-compressing institutions are weaker, firms invest more in high-skilled workers. We provide evidence consistent with this view based on an industry panel for West Germany and the US between the 1970s and 1990s. We show that capital equipment per worker is less positively associated with the wage differential in West Germany than in the US. This descriptive evidence is robust to many alternative measures for capital and skills. Our estimates imply that capital deepening in Germany in the 1980s is associated with a reduction in the wage differential of about 10-20% in most industries. In the US instead, capital deepening is associated with an increase of the wage differential between 5 and 15% in most industries.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://ftp.iza.org/dp2065.pdf
Download Restriction: no

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2065.

as
in new window

Length: 52 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2065
Contact details of provider: Postal:
IZA, P.O. Box 7240, D-53072 Bonn, Germany

Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information: Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. 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.
  2. Bronwyn Hall & Adam Jaffe & Manuel Trajenberg, 2000. "Market Value and Patent Citations: A First Look," Economics Series Working Papers 2000-W17, University of Oxford, Department of Economics.
  3. Falk, Martin & Koebel, Bertrand, 2003. "The Impact of Office Machinery and Computer Capital on the Demand for Heterogeneous Labour," IZA Discussion Papers 873, Institute for the Study of Labor (IZA).
  4. Plutarchos Sakellaris & Focco Vijselaar, 2005. "Capital quality improvement and the sources of economic growth in the euro area," Economic Policy, CEPR;CES;MSH, vol. 20(42), pages 267-306, 04.
  5. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, March.
  6. Pischke, Jörn-Steffen, 2004. "Labor Market Institutions, Wages, and Investment," IZA Discussion Papers 1268, Institute for the Study of Labor (IZA).
  7. Stephen Machin & John Van Reenen, 1998. "Technology and changes in skill structure: evidence from seven OECD countries," IFS Working Papers W98/04, Institute for Fiscal Studies.
  8. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
  9. Koeniger, Winfried & Leonardi, Marco & Nunziata, Luca, 2004. "Labour Market Institutions and Wage Inequality," IZA Discussion Papers 1291, Institute for the Study of Labor (IZA).
  10. Krueger, A. & Pischke, J.S., 1997. "Observations and Conjectures on the U.S. Employment Miracle," Working papers 97-15, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Berman, E. & Bound, J. & Machin, S., 1997. "Implications of Skill-Biased Technological Change: International Evidence," Papers 25, Centre for Economic Performance & Institute of Economics.
  12. Caballero, R-J & Hammour, M-L, 1996. "The Macroeconomics of Specificity," Working papers 96-25, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Fitzenberger, Bernd & Osikominu, Aderonke & Völter, Robert, 2005. "Imputation rules to improve the education variable in the IAB employment subsample," FDZ Methodenreport 200503_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  14. Dirk Krueger & Krishna B. Kumar, 2003. "Skill-specific rather then General Education: A Reason for US-Europe Growth Differences?," NBER Working Papers 9408, National Bureau of Economic Research, Inc.
  15. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages F121-F149, February.
  16. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U.S. Wage Inequality: Re-Assessing the Revisionists," NBER Working Papers 11627, National Bureau of Economic Research, Inc.
  17. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August.
  18. Paul Beaudry & David A. Green, 2003. "Wages and Employment in the United States and Germany: What Explains the Differences?," American Economic Review, American Economic Association, vol. 93(3), pages 573-602, June.
  19. Richard Rogerson, 2006. "Structural Transformation and the Labor Market," 2006 Meeting Papers 256, Society for Economic Dynamics.
  20. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  21. Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc.
  22. Sakellaris, Plutarchos & Vijselaar, Focco, 2004. "Capital quality improvement and the sources of growth in the euro area," Working Paper Series 0368, European Central Bank.
  23. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp2065. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.