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Understanding Inter-Industry Wage Structures in the Euro Area

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Listed:
  • Genre, Véronique

    (European Central Bank)

  • Kohn, Karsten

    (KfW Bankengruppe)

  • Momferatou, Daphne

    (European Central Bank)

Abstract

This paper focuses on the euro area wage structure and its potential determinants from a sectoral viewpoint. Merging information from the OECD Structural Analysis database with data from the EU Labour Force Survey, we construct a cross-country panel of 22 industries in 8 euro area countries for 1991-2002. Data inspection confirms the existence of a fairly stable inter-industry wage structure that is similar across countries. We then apply panel data techniques to identify factors explaining inter-industry wage differentials in the euro area. Both workforce characteristics (e.g., human capital variables) and firm-related characteristics (e.g., capital intensity, productivity) contribute significantly. However, considerable wage heterogeneity across sectors remains. Idiosyncratic sector and country specifics, reflecting different socio-cultural and institutional backgrounds, appear to bear a major role. While our empirical analysis only uses direct evidence from workforce and firm-related characteristics, we also try to relate the remaining heterogeneity to institutional characteristics, based on related literature.

Suggested Citation

  • Genre, Véronique & Kohn, Karsten & Momferatou, Daphne, 2009. "Understanding Inter-Industry Wage Structures in the Euro Area," IZA Discussion Papers 4114, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4114
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    2. da Silveira, Jaylson Jair & Lima, Gilberto Tadeu, 2021. "Wage inequality as a source of endogenous macroeconomic fluctuations," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 35-52.
    3. Jan Kluge & Michael Weber, 2015. "Decomposing the German East-West wage gap," ifo Working Paper Series 205, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. Ohyun Kwon & Simon Chang & Belton M. Fleisher, 2015. "Evolution of the Interindustry Wage Structure in China Since the 1980s," Pacific Economic Review, Wiley Blackwell, vol. 20(1), pages 17-44, February.
    5. Brand, Claus & Obstbaum, Meri & Coenen, Günter & Sondermann, David & Lydon, Reamonn & Ajevskis, Viktors & Hammermann, Felix & Angino, Siria & Hernborg, Nils & Basso, Henrique & Hertweck, Matthias & Bi, 2021. "Employment and the conduct of monetary policy in the euro area," Occasional Paper Series 275, European Central Bank.
    6. Latorre, Maria C., 2014. "CGE analysis of the impact of foreign direct investment and tariff reform on female and male wages," Policy Research Working Paper Series 7073, The World Bank.
    7. Sile Padraigin O'Dorchai, 2008. "Do women gain or lose from becoming mothers? A comparative wage analysis in 20 European countries," ULB Institutional Repository 2013/135835, ULB -- Universite Libre de Bruxelles.
    8. Jakub Growiec, 2009. "Determinants of the Labor Share: Evidence from a Panel of Firms," NBP Working Papers 69, Narodowy Bank Polski.
    9. Jan Kluge & Michael Weber, 2018. "Decomposing the German East–West wage gap," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 26(1), pages 91-125, January.
    10. Kwon, Ohyun & Fleisher, Belton M. & Quheng, Deng, 2011. "Evolution of the Industrial Wage Structure in China Since 1980," IZA Discussion Papers 5880, Institute of Labor Economics (IZA).
    11. Leon Bettendorf & Kees Folmer & Egbert Jongen, 2013. "The dog that did not bark: The EITC for single mothers in the Netherlands," CPB Discussion Paper 229.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    12. Van Ha Le & Jakob De Haan & Erik Dietzenbacher, 2018. "Industry Wages Across Countries and Over Time: A New Database of Micro Survey Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(1), pages 1-25, March.
    13. Latorre, María C., 2014. "A CGE analysis of the impact of foreign direct investment and tariff reform on female and male wages," Conference papers 332453, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    14. Boeters, Stefan & Savard, Luc, 2013. "The Labor Market in Computable General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 1645-1718, Elsevier.

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    More about this item

    Keywords

    firm and workforce characteristics; panel estimation; inter-industry wage differentials; labour market institutions; euro area;
    All these keywords.

    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
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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