IDEAS home Printed from https://ideas.repec.org/p/cpd/pd2002/d3-3.html
   My bibliography  Save this paper

Wage Rigidities in Western Germany? Microeconometric Evidence from the 1990s

Author

Listed:
  • Patrick A. Puhani

    (SIAW, University of Sankt Gallen)

Abstract

This paper investigates whether and in what sense the west German wage structure has been 'rigid' in the 1990s. To test the hypothesis that a rigid wage structure has been responsible for rising low-skilled unemployment, I propose a methodology which makes less restrictive identifying assumptions than some previous related work. I find that the relative stability of educational wage premia was justified by market forces. However, relative wages did not respond to negative net demand shocks for young workers, as well as white-collar workers.

Suggested Citation

  • Patrick A. Puhani, 2002. "Wage Rigidities in Western Germany? Microeconometric Evidence from the 1990s," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 D3-3, International Conferences on Panel Data.
    • Handle: RePEc:cpd:pd2002:d3-3
    as

    Download full text from publisher

    File URL: http://econpapers.repec.org/cpd/2002/46_Puhani.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kevin M. Murphy & Finis Welch, 1992. "The Structure of Wages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 285-326.
    2. John P. Haisken-DeNew & Christoph M. Schmidt, 2000. "Interindustry and Interregion Differentials: Mechanics and Interpretation," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 516-521, August.
    3. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, April.
    4. Patrick A. Puhani, 2000. "On the Identification of Relative Wage Rigidity Dynamics," William Davidson Institute Working Papers Series 343, William Davidson Institute at the University of Michigan.
    5. Freeman, Richard & Schettkat, Ronald, 2001. "Skill Compression, Wage Differentials, and Employment: Germany vs the US," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 582-603, July.
    6. Fitzenberger, Bernd & Franz, Wolfgang, 1999. "Industry-level wage bargaining : a partial rehabilitation ; the German experience," ZEW Discussion Papers 99-33, ZEW - Leibniz Centre for European Economic Research.
    7. Booth,Alison L., 1994. "The Economics of the Trade Union," Cambridge Books, Cambridge University Press, number 9780521468398, September.
    8. Katharine G. Abraham & Susan Houseman, 1995. "Earnings Inequality in Germany," NBER Chapters, in: Differences and Changes in Wage Structures, pages 371-404, National Bureau of Economic Research, Inc.
    9. Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, vol. 86(2), pages 302-308, May.
    10. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
    11. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555, Elsevier.
    12. Lauer, Charlotte & Steiner, Viktor, 2000. "Returns to education in West Germany: an empirical assessment," ZEW Discussion Papers 00-04, ZEW - Leibniz Centre for European Economic Research.
    13. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    14. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
    15. Leung, Siu Fai & Yu, Shihti, 1996. "On the choice between sample selection and two-part models," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 197-229.
    16. Entorf, Horst, 1996. "Strukturelle Arbeitslosigkeit in Deutschland : Mismatch, Mobilität und technologischer Wandel," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 20725, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    17. Blau, Francine D. & Kahn, Lawrence M., 1999. "Institutions and laws in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 25, pages 1399-1461, Elsevier.
    18. repec:bla:scotjp:v:46:y:1999:i:4:p:437-57 is not listed on IDEAS
    19. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
    20. David Card & Francis Kramarz & Thomas Lemieux, 1999. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," Canadian Journal of Economics, Canadian Economics Association, vol. 32(4), pages 843-877, August.
    21. Martin Falk & Bertrand Koebel, 2001. "A dynamic heterogeneous labour demand model for German manufacturing," Applied Economics, Taylor & Francis Journals, vol. 33(3), pages 339-348.
    22. Steiner, Viktor & Wagner, Kersten, 1997. "Relative Earnings and the Demand for Unskilled Labor in West German Manufacturing," ZEW Discussion Papers 97-17, ZEW - Leibniz Centre for European Economic Research.
    23. Puhani, Patrick A., 2000. "On the identification of relative wage rigidity dynamics: a proposal for a methodology on cross-section data and empirical evidence for Poland in transition," ZEW Discussion Papers 00-56, ZEW - Leibniz Centre for European Economic Research.
    24. Freeman Richard B. & Schettkat Ronald, 1999. "The Role of Wage and Skill Differences in US-German Employment Differences / Die Bedeutung von Lohn- und Qualifikationsunterschieden für die deutschen-amerikanischen Beschäftigungsunterschiede," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 219(1-2), pages 49-66, February.
    25. Patrick Puhani, 2000. "The Heckman Correction for Sample Selection and Its Critique," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 53-68, February.
    26. Gourieroux, Christian & Monfort, Alain & Trognon, Alain, 1984. "Pseudo Maximum Likelihood Methods: Theory," Econometrica, Econometric Society, vol. 52(3), pages 681-700, May.
    27. Fitzenberger, Bernd & Franz, Wolfgang, 1997. "Flexibilität der qualifikatorischen Lohnstruktur und Lastverteilung der Arbeitslosigkeit: Eine ökonometrische Analyse für Westdeutschland," ZEW Discussion Papers 97-32, ZEW - Leibniz Centre for European Economic Research.
    28. Siebert, Horst, 1997. "Labor market rigidities and unemployment in Europe," Kiel Working Papers 787, Kiel Institute for the World Economy (IfW Kiel).
    29. Büttner, Thiess & Fitzenberger, Bernd, 1998. "Central wage bargaining and local wage flexibility: evidence from the entire wage distribution," ZEW Discussion Papers 98-39, ZEW - Leibniz Centre for European Economic Research.
    30. Carlin, Wendy & Soskice, David, 1990. "Macroeconomics and the Wage Bargain: A Modern Approach to Employment, Inflation, and the Exchange Rate," OUP Catalogue, Oxford University Press, number 9780198772446.
    31. Bonin, Holger & Zimmermann, Klaus F., 2000. "The Post-Unification German Labor Market," IZA Discussion Papers 185, Institute of Labor Economics (IZA).
    32. FitzRoy, Felix & Funke, Michael, 1995. "Capital-Skill Complementarity in West German Manufacturing," Empirical Economics, Springer, vol. 20(4), pages 651-665.
    33. Yun, Myeong-Su, 2000. "Decomposition Analysis for a Binary Choice Model," IZA Discussion Papers 145, Institute of Labor Economics (IZA).
    34. Fitzenberger, Bernd & Franz, Wolfgang, 2000. "Jobs. Jobs? Jobs! Orientierungshilfen für den Weg zu mehr Beschäftigung," ZEW Discussion Papers 00-49, ZEW - Leibniz Centre for European Economic Research.
    35. Paul R. Krugman, 1994. "Past and prospective causes of high unemployment," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Jan, pages 49-98.
    36. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1.
    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 410-442, June.
    38. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August.
    39. Richard B. Freeman & Ronald Schettkat, 2000. "The Role of Wage and Skill Differences in US-German Employment Differences," NBER Working Papers 7474, National Bureau of Economic Research, Inc.
    40. Bernhard Boockmann & Viktor Steiner, 2006. "Cohort effects and the returns to education in West Germany," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1135-1152.
    41. 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.
    42. repec:bla:scandj:v:92:y:1990:i:2:p:215-35 is not listed on IDEAS
    43. Möller Joachim, 1999. "Die Entwicklung der qualifikatorischen Lohnund Beschäftigungsstruktur in Deutschland / Changes of the Structure of Wages and Employment with Respect to Qualifications in Germany: Eine empirische Besta," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 219(1-2), pages 8-31, February.
    44. Nickell, Stephen & Bell, Brian, 1995. "The Collapse in Demand for the Unskilled and Unemployment across the OECD," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 11(1), pages 40-62, Spring.
    45. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-816, May.
    46. Freeman, Richard B. & Katz, Lawrence F. (ed.), 1995. "Differences and Changes in Wage Structures," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226261607.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Puhani, Patrick A., 2003. "A Test of the 'Krugman Hypothesis' for the United States, Britain, and Western Germany," ZEW Discussion Papers 03-18, ZEW - Leibniz Centre for European Economic Research.
    2. Patrick Puhani, 2002. "A Note on Changes in the Wage and Unemployment Structures in Spain: Evidence from the Luxembourg Income Study," LIS Working papers 328, LIS Cross-National Data Center in Luxembourg.
    3. Patrick A. Puhani, 2002. "The Rise and Fall of Swiss Unemployment - Relative Demand Shocks, Wage Rigidities, and Temporary Immigrants," University of St. Gallen Department of Economics working paper series 2002 2002-29, Department of Economics, University of St. Gallen.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jeff Borland, 2000. "Economic Explanations of Earnings Distribution Trends in the International Literature and Application to New Zealand," Treasury Working Paper Series 00/16, New Zealand Treasury.
    2. Puhani, Patrick A., 2003. "A Test of the 'Krugman Hypothesis' for the United States, Britain, and Western Germany," ZEW Discussion Papers 03-18, ZEW - Leibniz Centre for European Economic Research.
    3. Steiner, Viktor & Mohr, Robert, 1998. "Industrial change, stability of relative earnings, and substitution of unskilled labor in West-Germany," ZEW Discussion Papers 98-22, ZEW - Leibniz Centre for European Economic Research.
    4. Patrick A. Puhani, 2000. "On the Identification of Relative Wage Rigidity Dynamics," William Davidson Institute Working Papers Series 343, William Davidson Institute at the University of Michigan.
    5. Patrick A. Puhani, 2008. "Transatlantic Differences in Labour Markets: Changes in Wage and Non‐Employment Structures in the 1980s and the 1990s," German Economic Review, Verein für Socialpolitik, vol. 9(3), pages 312-338, August.
    6. PUHANI Patrick A., 2000. "On the Identification of Relative Wage Rigidity Dynamics A Proposal for a Methodology on Cross-Section Data and Empirical Evidence for Poland in Transition," IRISS Working Paper Series 2000-11, IRISS at CEPS/INSTEAD.
    7. Giuseppe Bertola & Francine Blau & Lawrence Kahn, 2007. "Labor market institutions and demographic employment patterns," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(4), pages 833-867, October.
    8. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages 121-149, February.
    9. Sonja Jovicic, 2015. "Wage Inequality, Skill Inequality, and Employment: Evidence from PIAAC," Schumpeter Discussion Papers SDP15007, Universitätsbibliothek Wuppertal, University Library.
    10. Giuseppe Bertola & Francine D. Blau & Lawrence M. Kahn, 2001. "Comparative Analysis of Labor Market Outcomes: Lessons for the US from International Long-Run Evidence," NBER Working Papers 8526, National Bureau of Economic Research, Inc.
    11. Alexandra Spitz-Oener, 2006. "Technical Change, Job Tasks, and Rising Educational Demands: Looking outside the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 235-270, April.
    12. Francine D. Blau & Lawrence M. Kahn, 2005. "Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 184-193, February.
    13. Puhani, Patrick A., 2002. "Relative wage and unemployment changes in Poland: microeconometric evidence," Economic Systems, Elsevier, vol. 26(2), pages 99-126, June.
    14. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers 8220, Institute of Labor Economics (IZA).
    15. Sonja Jovicic, 2016. "Wage inequality, skill inequality, and employment: evidence and policy lessons from PIAAC," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-26, December.
    16. Fitzenberger, Bernd & Kohn, Karsten, 2006. "Skill Wage Premia, Employment, and Cohort Effects: Are Workers in Germany All of the Same Type?," IZA Discussion Papers 2185, Institute of Labor Economics (IZA).
    17. Patrick A. Puhani, 2002. "The Rise and Fall of Swiss Unemployment - Relative Demand Shocks, Wage Rigidities, and Temporary Immigrants," University of St. Gallen Department of Economics working paper series 2002 2002-29, Department of Economics, University of St. Gallen.
    18. Gustav A. Horn & Heike Joebges & Torsten Niechoj & Christian R. Proaño & Simon Sturn & Silke Tober & Achim Truger & Till van Treeck, 2009. "Von der Finanzkrise zur Weltwirtschaftskrise (I)," IMK Report 38-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    19. Alberto Alesina & Michele Battisti & Joseph Zeira, 2018. "Technology and labor regulations: theory and evidence," Journal of Economic Growth, Springer, vol. 23(1), pages 41-78, March.
    20. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(2), pages 843-881.

    More about this item

    Keywords

    wages; unemployment; rigidities; identification; Germany;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpd:pd2002:d3-3. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sune Karlsson (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.