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

Author/Editor:

Eswar S Prasad

Publication Date:

January 1, 2000

Electronic Access:

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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.

Series:

Working Paper No. 2000/022

Subject:

Income inequality Labor Labor markets National accounts Wage adjustments Wage structure Wages

English

Publication Date:

January 1, 2000

ISBN/ISSN:

9781451843965/1018-5941

Stock No:

WPIEA0222000

Pages:

52

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