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Understanding Inter-Industry Wage Structures in the Euro Area

  • Genre, Véronique

    ()

    (European Central Bank)

  • Kohn, Karsten

    ()

    (KfW Bankengruppe)

  • Momferatou, Daphne

    ()

    (European Central Bank)

This paper focuses on the euro area wage structure and its potential determinants from a sectoral viewpoint. Merging information from the OECD Structural Analysis database with data from the EU Labour Force Survey, we construct a cross-country panel of 22 industries in 8 euro area countries for 1991-2002. Data inspection confirms the existence of a fairly stable inter-industry wage structure that is similar across countries. We then apply panel data techniques to identify factors explaining inter-industry wage differentials in the euro area. Both workforce characteristics (e.g., human capital variables) and firm-related characteristics (e.g., capital intensity, productivity) contribute significantly. However, considerable wage heterogeneity across sectors remains. Idiosyncratic sector and country specifics, reflecting different socio-cultural and institutional backgrounds, appear to bear a major role. While our empirical analysis only uses direct evidence from workforce and firm-related characteristics, we also try to relate the remaining heterogeneity to institutional characteristics, based on related literature.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4114.

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Length: 43 pages
Date of creation: Apr 2009
Date of revision:
Publication status: published in: Applied Economics, 2011, 43 (11), 1299 - 1313
Handle: RePEc:iza:izadps:dp4114
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