Are Individual Characteristics All that Matters in Earnings Determination? Evidence from the US and Germany

University of Aberdeen, Discussion Paper in Economics No. 15-14

35 Pages Posted: 12 Mar 2016 Last revised: 25 Mar 2016

See all articles by W. David McCausland

W. David McCausland

University of Aberdeen - Business School

Fraser Summerfield

University of Aberdeen - Economics; CELMR; Rimini Center for Economic Analysis (RCEA)

Ioannis Theodossiou

University of Aberdeen - Business School

Date Written: December 17, 2015

Abstract

Industry wage differentials may result either from the structure of the industry (demand type) or human capital (supply type) characteristics of the employed labour force. This study uses two major data sets from Germany and the US that allow the investigation of the effects of these demand and supply type factors on average earnings across industries. The main contribution of the paper shows that aggregate demand relevant to the particular industry has a strong positive effect on the industry's average earnings in addition to the previously established results regarding the significance of the effects of worker and firm characteristics. Consequently, labour market policies, which address solely the characteristics of the workforce and their human capital without due consideration of the macroeconomic environment and the structure of the industry, should be expected to produce the disappointing results of an increasing share of low pay employment in the wage distribution.

Keywords: macroeconomic demand, industrial earnings, vacancies

JEL Classification: J31, J63, E24

Suggested Citation

McCausland, W. David and Summerfield, Fraser and Theodossiou, Ioannis, Are Individual Characteristics All that Matters in Earnings Determination? Evidence from the US and Germany (December 17, 2015). University of Aberdeen, Discussion Paper in Economics No. 15-14, Available at SSRN: https://ssrn.com/abstract=2746462 or http://dx.doi.org/10.2139/ssrn.2746462

W. David McCausland (Contact Author)

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Old Aberdeen AB24 3QY, Scotland AB24 3QY
United Kingdom

Fraser Summerfield

University of Aberdeen - Economics ( email )

Aberdeen
United Kingdom

CELMR ( email )

Aberdeen, 01224 2720
United Kingdom

Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Ioannis Theodossiou

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

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