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Industry Wage Differentials Revisited: A Longitudinal Comparison of Germany and USA (1984-1996)

Author

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  • de New, John

    (Melbourne Institute of Applied Economic and Social Research)

  • Schmidt, Christoph M.

    (RWI)

Abstract

In this paper, the inter-industry wage structure in West Germany and USA is compared using the German Socio-Economic Panel (GSOEP), the German Mikrozensus (MZ), the American Panel Study of Income Dynamics (PSID) and the American Current Population Survey (CPS) from 1984 to 1996. Using a sample of prime age full-time employed males from the respective datasets, it is shown that the structure of wages has remained remarkably stable over this time period, and that the German structure resembles the American structure strongly. Cross-sectional and panel results are provided for both countries. Controlling for unobserved heterogeneity in the random effects panel estimations reduces the industry wage dispersion by about half. Thus, although the MZ and the CPS provide very large sample sizes, panel data sets (although typically smaller in sample size) are still very important in getting at the essence of the industry wage structure and the absolute level of industry wage dispersion. In calculating inter-industry wage differentials as deviations from a hypothetical employment-share weighted mean, we use the methodology as described in Haisken-DeNew and Schmidt (1997) of calculating exact differentials and their respective standard errors.

Suggested Citation

  • de New, John & Schmidt, Christoph M., 1999. "Industry Wage Differentials Revisited: A Longitudinal Comparison of Germany and USA (1984-1996)," IZA Discussion Papers 98, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp98
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    References listed on IDEAS

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    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. Schmidt, Christoph M & Zimmermann, Klaus F, 1991. "Work Characteristics, Firm Size and Wages," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 705-710, November.
    3. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
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    5. Daniel Feenberg, 1993. "CPS labor extracts available," Stata Technical Bulletin, StataCorp LP, vol. 2(9).
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    7. Jean Helwege & Joachim Wagner, 1991. "More on the international similarity of interindustry wage differentials: evidence from the Federal Republic of Germany and the U.S," Finance and Economics Discussion Series 167, Board of Governors of the Federal Reserve System (U.S.).
    8. Maury Gittleman & Edward N. Wolff, 1993. "International Comparisons Of Inter‐Industry Wage Differentials," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(3), pages 295-312, September.
    9. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Christoph M. Schmidt & Michael Fertig, 2002. "Mobility within Europe – The Attitudes of European Youngsters," RWI Discussion Papers 0001, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
    2. Fertig, Michael & Schmidt, Christoph M., 2000. "Discretionary Measures of Active Labor Market Policy: The German Employment Promotion Reform in Perspective," IZA Discussion Papers 182, Institute of Labor Economics (IZA).
    3. Fertig, Michael & Schmidt, Christoph M., 2003. "Mobility within Europe - The Attitudes of European Youngsters," RWI Discussion Papers 1, RWI - Leibniz-Institut für Wirtschaftsforschung.
    4. Nannan Lundin & Lihong Yun, 2009. "International Trade and Inter‐Industry Wage Structure in Swedish Manufacturing: Evidence from Matched Employer–Employee Data," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 87-102, February.
    5. Karin Mayr, 2008. "Optimal quota for sector-specific immigration," Economics working papers 2008-07, Department of Economics, Johannes Kepler University Linz, Austria.
    6. Cathy Yang Liu & Xi Huang, 2016. "The Rise of Urban Entrepreneurs in China: Capital Endowments and Entry Dynamics," Growth and Change, Wiley Blackwell, vol. 47(1), pages 32-52, March.
    7. David Card & Jesse Rothstein & Moises Yi, 2024. "Industry Wage Differentials: A Firm-Based Approach," Journal of Labor Economics, University of Chicago Press, vol. 42(S1), pages 11-59.
    8. Eloy Gil-Cordero & Francisco Javier Rondán-Cataluña & Daniel Sigüenza-Morales, 2020. "Private Label and Macroeconomic Indicators: Europe and USA," Administrative Sciences, MDPI, vol. 10(4), pages 1-17, November.
    9. Zhao Chen & Ming Lu & Hiroshi Sato, 2009. "Social Networks and Labor Market Entry Barriers: Understanding Inter-industrial Wage Differentials in Urban China," Global COE Hi-Stat Discussion Paper Series gd09-084, Institute of Economic Research, Hitotsubashi University.
    10. Camille Logeay & Sabine Stephan & Rudolf Zwiener, 2011. "Driving forces behind the sectoral wage costs differentials in Europe," IMK Working Paper 10-2011, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    11. repec:zbw:rwidps:0001 is not listed on IDEAS
    12. Sébastien Jean & Giuseppe Nicoletti, 2004. "Regulation and Wage Premia," Working Papers 2004-12, CEPII research center.
    13. Fertig, Michael & Schmidt, Christoph M., 2002. "Mobility within Europe – What do we (still not) know?," IZA Discussion Papers 447, Institute of Labor Economics (IZA).
    14. Karin Mayr, 2012. "Occupation-specific immigration quotas in political equilibrium," Vienna Economics Papers 1207, University of Vienna, Department of Economics.
    15. Bonin, Holger & Zimmermann, Klaus F., 2000. "The Post-Unification German Labor Market," IZA Discussion Papers 185, Institute of Labor Economics (IZA).
    16. Wapler, Rüdiger, 2001. "Unions, efficiency wages, and unemployment," Tübinger Diskussionsbeiträge 210, University of Tübingen, School of Business and Economics.
    17. Zhao Chen & Ming Lu & Guanghua Wan, 2010. "Inter-Industry Wage Differentials: An Increasingly Important Contributor to Urban China Income Inequality," Global COE Hi-Stat Discussion Paper Series gd09-130, Institute of Economic Research, Hitotsubashi University.

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    More about this item

    Keywords

    Inter-Industry Wage Differentials; West Germany; USA; dummy variables; restricted least squares; weighted standard deviation;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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