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A breakdown of residual wage inequality in Germany: wage decompositions using worker-, plant-, region-, and sector-specific determinants

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  • Philipp Ehrl

Abstract

The present paper applies regression-based decomposition methods to analyse the impact of worker-, plant-, region-, and sector-specific determinants on the level and the continuous increase in wage inequality between 1995 and 2007 in Germany. Almost the entire increase in wage inequality is explained by this approach. Altogether, changes in the composition of wage determinants are minor compared to changes in their returns. In particular, occupation-specific skills are the most important wage determinant. Changes in the age structure, unemployment rates, and the plant size premium in combination with assortative matching are also important factors that contribute to the rise in wage inequality.

Suggested Citation

  • Philipp Ehrl, 2017. "A breakdown of residual wage inequality in Germany: wage decompositions using worker-, plant-, region-, and sector-specific determinants," Oxford Economic Papers, Oxford University Press, vol. 69(1), pages 75-96.
    • Handle: RePEc:oup:oxecpp:v:69:y:2017:i:1:p:75-96.
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    File URL: http://hdl.handle.net/10.1093/oep/gpw025
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    Citations

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    Cited by:

    1. Seckler, Matthias, 2019. "Increasing inequality in lifetime earnings: A tale of educational upgrading and changing employment patterns," University of Tübingen Working Papers in Business and Economics 119, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    2. Martin Biewen & Matthias Seckler, 2019. "Unions, Internationalization, Tasks, Firms, and Worker Characteristics: A Detailed Decomposition Analysis of Rising Wage Inequality in Germany," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(4), pages 461-498, December.
    3. Ayal Kimhi & Nirit Hanuka-Taflia, 2019. "What drives the convergence in male and female wage distributions in Israel? A Shapley decomposition approach," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(3), pages 379-399, September.
    4. Philipp Ehrl, 2019. "On The Use Of Firm Fixed Effects As A Productivity Measure For Analyzing Labor Market Matching," Bulletin of Economic Research, Wiley Blackwell, vol. 71(2), pages 195-208, April.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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