What Drives Wage Gaps in Europe?

29 Pages Posted: 4 Oct 2017 Last revised: 17 Jan 2018

See all articles by Jan Drahokoupil

Jan Drahokoupil

University of Mannheim - Mannheim Centre for European Social Research (MZES); European Trade Union Institute (ETUI)

Agnieszka Piasna

European Trade Union Institute (ETUI)

Date Written: September 15, 2017

Abstract

This working paper investigates wage differences across Europe. It estimates to what extent wage gaps in average wages observed between countries are related to differences in workforce composition, in workplaces, as well as the types of jobs conducted in different countries. This report also assesses the observed differences in returns on endowments by identifying which sectors and occupational groups contribute most to the wage gaps observed at the country level.

The wage gaps between high-wage and low-wage countries are higher once differences in worker, work and workplace characteristics are controlled for. In contrast, the differences in wages between high-wage countries diminish when we control for these characteristics. The wage gap between East and West thus seems to be driven by a much lower return on skills and the relative position of sectors and occupations in high-wage countries, rather than by differences in the composition of the workforce and firms.

Keywords: wages; wage differential; comparison; EU countries

Suggested Citation

Drahokoupil, Jan and Piasna, Agnieszka, What Drives Wage Gaps in Europe? (September 15, 2017). ETUI Research Paper - Working Paper 2017.04. Available at SSRN: https://ssrn.com/abstract=3047147 or http://dx.doi.org/10.2139/ssrn.3047147

Jan Drahokoupil (Contact Author)

University of Mannheim - Mannheim Centre for European Social Research (MZES) ( email )

D-68131 Mannheim
Germany

HOME PAGE: http://drahokoupil.blogspot.com

European Trade Union Institute (ETUI) ( email )

B-1210 Brussels
Belgium

Agnieszka Piasna

European Trade Union Institute (ETUI) ( email )

B-1210 Brussels
Belgium

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