The Unbearable Stability of the German Wage Structure: Evidence and Interpretation

January 1, 2000

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Eswar S Prasad. The Unbearable Stability of the German Wage Structure: Evidence and Interpretation, (USA: International Monetary Fund, 2000) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper uses micro data from the German Socio-Economic Panel to document that the wage structure in West Germany was remarkably stable during 1984-97, with little variation over time in wage or earnings inequality between and within different skill groups. Empirical evidence suggests that this stability is attributable to institutional factors rather than market forces. The rigidity of relative wages, despite relative shifts in labor demand that favor skilled workers, has resulted in sharp declines in employment rates for unskilled workers. The microeconomic evidence is shown to have important implications for interpreting trends in wage shares, capital-labor ratios, and aggregate unemployment.

Subject: Income inequality, Labor, Labor markets, National accounts, Wage adjustments, Wage structure, Wages

Keywords: Employment share, Income inequality, Labor market experience, Labor market outcomes across skill groups, Labor markets, Net effect, Percentile differential, Quantile regression, Returns to human capital, Selection effect, Skill price, Standard deviation, Supply shock, Unskilled worker, Wage adjustments, Wage and earnings inequality, Wage distribution, Wage inequality, Wage regression, Wage structure, Wages, WP

Publication Details

Pages:

52
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/022
Stock No:

WPIEA0222000
ISBN:

9781451843965
ISSN:

1018-5941

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