More evidence on the puzzle of interindustry wage differentials: the case of West Germany
In West Germany workers with similar skills earn different wages according to the industry in which they are employed. This finding is no surprise given the institutional rigidities of the West German labor market. But the similarity of the interindustry wage structures in West Germany and in the U.S. points to a puzzle since these countries exhibit totally different labor market institutions. Typical high-wage industries in both countries are motor vehicles and petroleum refining. Furthermore, large correlations of wages between any two qualification groups of workers within an industry in both countries cannot easily be explained by standard neoclassical labor market theories. Once alternative theories are accepted, the economic policy prescriptions regarding the labor market become very different.
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