Dynamics of Earnings and Hourly Wages in Germany
26 Pages Posted: 19 Oct 2008
There are 2 versions of this paper
Dynamics of Earnings and Hourly Wages in Germany
Abstract
There is by now a vast number of studies which document a sharp increase in cross-sectional wage inequality during the 2000s. It is often assumed that this inequality is of a permanent nature which in turn is used as an argument calling for government intervention. We examine these claims using a fully balanced panel of full-time employed individuals in Germany from the German Socio-Economic Panel for the years 1994-2006. In line with previous studies, our sample shows sharply rising inequality during the 2000s. Applying covariance structure models, we calculate the fraction of permanent and transitory wage and earnings inequality. From 1994 on, permanent inequality increases continuously, peaks in 2001 and then declines in subsequent years. Interestingly the decline in the permanent fraction of inequality occurs at the time of most rapid increases in cross-sectional inequality. It seems therefore that it is primarily the temporary and not the permanent component which has driven the strong expansion of cross-sectional inequality during the 2000s in Germany.
Keywords: variance decomposition, covariance structure models, earnings inequality, wage dynamics
JEL Classification: C23, D31, J31
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Income Inequality in the United States, 1913-1998 (Series Updated to 2000 Available)
By Thomas Piketty and Emmanuel Saez
-
The Evolution of Top Incomes: A Historical and International Perspective
By Thomas Piketty and Emmanuel Saez
-
Top Wealth Shares in the United States: 1916-2000: Evidence from Estate Tax Returns
By Emmanuel Saez and Wojciech Kopczuk
-
Where Did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income
-
Where Did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income
-
The Distribution of Top Incomes in Australia
By Anthony B. Atkinson and Andrew Leigh
-
Dying to Save Taxes: Evidence from Estate Tax Returns on the Death Elasticity
By Wojciech Kopczuk and Joel B. Slemrod
-
The Distribution of Top Incomes in New Zealand
By Anthony B. Atkinson and Andrew Leigh