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

Workplace Heterogeneity and the Rise of West German Wage Inequality

  • Heining, Jörg
  • Card, David
  • Kline, Patrick

We study the role of establishment-specific wage premiums in generating recent increases in West German wage inequality. Models with additive fixed effects for workers and establishments are fit in four sub-intervals spanning the period from 1985 to 2009. We show that these models provide a good approximation to the wage structure and can explain nearly all of the dramatic rise in West German wage inequality. Our estimates suggest that the increasing variability of West German wages has arisen from a combination of rising heterogeneity between workers, rising variability in the wage premiums at different establishments, and increasing assortativeness in the assignment of workers to plants. In contrast, the idiosyncratic job-match component of wage variation is small and stable over time. Decomposing changes in mean wages between different education groups, occupations, and industries, we and that increasing plant-level heterogeneity and rising assortativeness in the assignment of workers to establishments explain a large share of the rise in inequality along all three dimensions.

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://econstor.eu/bitstream/10419/80034/1/VfS_2013_pid_21.pdf
Download Restriction: no

Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 80034.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:zbw:vfsc13:80034
Contact details of provider: Web page: http://www.socialpolitik.org/
Email:


More information through EDIRC

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. Oskar Nordström Skans & Per-Anders Edin & Bertil Holmlund, 2007. "Wage dispersion between and within plants: Sweden 1985-2000," NBER Working Papers 13021, National Bureau of Economic Research, Inc.
  2. Ana Rute Cardoso, 1999. "Firms' wage policies and the rise in labor market inequality: The case of Portugal," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 53(1), pages 87-102, October.
  3. Richard B. Freeman, 1978. "Unionism and the Dispersion of Wages," NBER Working Papers 0248, National Bureau of Economic Research, Inc.
  4. Postel-Vinay & Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Working Papers 155908, Institut National de la Recherche Agronomique, France.
  5. Goux, Dominique & Maurin, Eric, 1999. "Persistence of Interindustry Wage Differentials: A Reexamination Using Matched Worker-Firm Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 492-533, July.
  6. Eichhorst, Werner, 2012. "The Unexpected Appearance of a New German Model," IZA Discussion Papers 6625, Institute for the Study of Labor (IZA).
  7. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  8. Katz, L.F. & Murphy, K.M., 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," Harvard Institute of Economic Research Working Papers 1580, Harvard - Institute of Economic Research.
  9. Nidardo, J. & Fortin, N. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Papers 93-94-15, California Irvine - School of Social Sciences.
  10. Dube, Arindrajit & Kaplan, Ethan, 2008. "Does Outsourcing Reduce Wages in the Low Wage Service Occupations? Evidence from Janitors and Guards," Institute for Research on Labor and Employment, Working Paper Series qt6s89498v, Institute of Industrial Relations, UC Berkeley.
  11. David Card & Jörg Heining & Patrick Kline, 2012. "Workplace Heterogeneity and the Rise of West German Wage Inequality," NBER Working Papers 18522, National Bureau of Economic Research, Inc.
  12. Jan Eeckhout & Philipp Kircher, 2009. "Identifying Sorting - In Theory," PIER Working Paper Archive 09-007, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  13. Machin, S. & Van Reenen, J., 1997. "Technology and Changes in Skill Structure: Evidence from Seven OECD Countries," Papers 24, Centre for Economic Performance & Institute of Economics.
  14. Bauer, Thomas K. & Zimmermann, Klaus F., 1999. "Occupational Mobility of Ethnic Migrants," IZA Discussion Papers 58, Institute for the Study of Labor (IZA).
  15. Nick Bloom & John Van Reenen, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," CEP Discussion Papers dp0716, Centre for Economic Performance, LSE.
  16. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 82(3), pages 371-92, June.
  17. Bachmann, Ronald & König, Marion & Schaffner, Sandra, 2012. "Lost in Transition? Minimum Wage Effects on German Construction Workers," IZA Discussion Papers 6760, Institute for the Study of Labor (IZA).
  18. Bernd Fitzenberger & Karsten Kohn & Alexander C. Lembcke, 2013. "Union Density and Varieties of Coverage: The Anatomy of Union Wage Effects in Germany," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 66(1), pages 169-197, January.
  19. Meghir, Costas & Pistaferri, Luigi, 2002. "Income Variance Dynamics and Heterogeneity," CEPR Discussion Papers 3632, C.E.P.R. Discussion Papers.
  20. Regina T. Riphahn & Daniel Schnitzlein, 2011. "Wage Mobility in East and West Germany," Working Papers 114, Bavarian Graduate Program in Economics (BGPE).
  21. Hirsch, Barry & Schumacher, Edward J., 2003. "Match Bias in Wage Gap Estimates Due to Earnings Imputation," IZA Discussion Papers 783, Institute for the Study of Labor (IZA).
  22. Jochen Kluve & Lena Jacobi, 2006. "Before and After the Hartz Reforms: The Performance of Active Labour Market Policy in Germany," RWI Discussion Papers 0041, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
  23. Antonczyk, Dirk & Fitzenberger, Bernd & Sommerfeld, Katrin, 2010. "Rising Wage Inequality, the Decline of Collective Bargaining, and the Gender Wage Gap," IZA Discussion Papers 4911, Institute for the Study of Labor (IZA).
  24. David H. Autor, 2009. "Introduction to "Studies of Labor Market Intermediation"," NBER Chapters, in: Studies of Labor Market Intermediation, pages 1-23 National Bureau of Economic Research, Inc.
  25. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  26. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 394-424, July.
  27. David H. Autor & Frank Levy & Richard J. Murnane, 2001. "The Skill Content of Recent Technological Change: An Empirical Exploration," NBER Working Papers 8337, National Bureau of Economic Research, Inc.
  28. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May.
  29. John M. ABOWD & Francis KRAMARZ, 2005. "Human Capital and Worker Productivity: Direct Evidence from Linked Employer-Employee Data," Annales d'Economie et de Statistique, ENSAE, issue 79-80, pages 323-338.
  30. Wolf Dieter Heinbach, 2006. "Bargained Wages in Decentralized Wage-Setting Regimes," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 276/2005, Department of Economics, University of Hohenheim, Germany.
  31. M. J. Andrews & L. Gill & T. Schank & R. Upward, 2008. "High wage workers and low wage firms: negative assortative matching or limited mobility bias?," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(3), pages 673-697.
  32. David Card & Francesco Devicienti & Agata Maida, 2010. "Rent-sharing, Holdup, and Wages: Evidence from Matched Panel Data," NBER Working Papers 16192, National Bureau of Economic Research, Inc.
  33. Michael C. Burda & Jennifer Hunt, 2011. "What Explains the German Labor Market Miracle in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 273-335.
  34. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January.
  35. Alda, Holger & Bender, Stefan & Gartner, Hermann, 2005. "The linked employer-employee dataset of the IAB (LIAB)," IAB Discussion Paper 200506, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  36. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers 559, Federal Reserve Bank of Minneapolis.
  37. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  38. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2003. "Wage bargaining with on-the-job search : theory and evidence," Research Unit Working Papers 0212, Laboratoire d'Economie Appliquee, INRA.
  39. Fredrik Andersson & Elizabeth E. Davis & Matthew L. Freedman & Julia I. Lane & Brian P. McCall & L. Kristin Sandusky, 2010. "Decomposing the Sources of Earnings Inequality: Assessing the Role of Reallocation," Working Papers 10-32, Center for Economic Studies, U.S. Census Bureau.
  40. Patrick Kline & Andres Santos, 2010. "Sensitivity to Missing Data Assumptions: Theory and An Evaluation of the U.S. Wage Structure," NBER Working Papers 15716, National Bureau of Economic Research, Inc.
  41. Van Reenen, John, 1994. "The Creation and Capture of Rents: Wages and Innovation in a Panel of UK Companies," CEPR Discussion Papers 1071, C.E.P.R. Discussion Papers.
  42. Gruetter, Max & Lalive, Rafael, 2009. "The importance of firms in wage determination," Labour Economics, Elsevier, vol. 16(2), pages 149-160, April.
  43. Mahmood Arai, 2003. "Wages, Profits, and Capital Intensity: Evidence from Matched Worker-Firm Data," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 593-618, July.
  44. Jesper Bagger & Rune Vejlin & Kenneth L. Sørensen, 2012. "Wage Sorting Trends," Economics Working Papers 2012-17, School of Economics and Management, University of Aarhus.
  45. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  46. Eichhorst, Werner & Marx, Paul, 2009. "Reforming German Labor Market Institutions: A Dual Path to Flexibility," IZA Discussion Papers 4100, Institute for the Study of Labor (IZA).
  47. Cardoso, Ana Rute, 1997. "Workers or Employers: Who Is Shaping Wage Inequality?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(4), pages 523-47, November.
  48. David H. Autor, 2009. "Studies of Labor Market Intermediation," NBER Books, National Bureau of Economic Research, Inc, number auto07-1, December.
  49. Peter Kuhn & Fernando Lozano, 2008. "The Expanding Workweek? Understanding Trends in Long Work Hours among U.S. Men, 1979-2006," Journal of Labor Economics, University of Chicago Press, vol. 26(2), pages 311-343, 04.
  50. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Sciences Po publications info:hdl:2441/dc0ckec3fcb, Sciences Po.
  51. N. Guertzgen, 2010. "Rent-sharing and collective wage contracts-evidence from German establishment-level data," Applied Economics, Taylor & Francis Journals, vol. 42(22), pages 2835-2854.
  52. Steve J. Davis & John Haltiwanger, 1991. "Wage Dispersion Between and Within U.S. Manufacturing Plants, 1963-1986," NBER Working Papers 3722, National Bureau of Economic Research, Inc.
  53. Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer.
  54. Holger Alda & Stefan Bender & Hermann Gartner, 2005. "European Data Watch: The linked employer-employee dataset created from the IAB establishment panel and the process-produced data of the IAB (LIAB)," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 125(2), pages 327-336.
  55. Groshen, Erica L, 1991. "Sources of Intra-industry Wage Dispersion: How Much Do Employers Matter?," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 869-84, August.
  56. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
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:zbw:vfsc13:80034. 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: (ZBW - German National Library of Economics)

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.