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Servitization, Inequality, and Wages

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  • Boddin, Dominik
  • Kroeger, Thilo

Abstract

This paper studies the effect of servitization, i.e., within-establishment changes in the labor force composition towards higher shares of workers with service occupations, on within-establishment wage inequality. We identify servitization as being a main driver of increasing within-establishment wage inequality. Servitization accounts for roughly 7% of the observed increase in the within-establishment wage inequality in manufacturing industries between 1994 and 2017. Higher servitization of an establishment’s labor force is associated with, on average, a lower wage level for otherwise equal workers across the majority of occupations. The wage decrease is particularly pronounced for workers in low-skilled manufacturing occupations and workers at the lower end of the wage distribution. These heterogeneous wage effects explain the increase in within-establishment wage inequality.

Suggested Citation

  • Boddin, Dominik & Kroeger, Thilo, 2022. "Servitization, Inequality, and Wages," Labour Economics, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:labeco:v:77:y:2022:i:c:s0927537121000464
    DOI: 10.1016/j.labeco.2021.102011
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    More about this item

    Keywords

    Employment Structure; Occupational Change; Within-Firm Adjustments; Inequality; Wages; Servitization; Germany;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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