Rising Wage Inequality in Germany

38 Pages Posted: 18 Apr 2006 Last revised: 26 Aug 2008

See all articles by Johannes Gernandt

Johannes Gernandt

Center for European Economic Research (ZEW)

Friedhelm Pfeiffer

Centre for European Economic Research (ZEW); University of Mannheim - Department of Economics; IZA Institute of Labor Economics

Date Written: April 2006

Abstract

This paper investigates the evolution of wages and the recent tendency to rising wage inequality in Germany, based on the German Socio-Economic Panel (GSOEP) for 1984 to 2004. Between 1984 and 1994 the wage distribution was fairly stable. Wage inequality started to increase around 1994 in Germany for all workers and for prime age dependent male workers as well. Rising inequality is not the result of the recent rise in self-employment. In West Germany rising inequality occurred in the lower part of the wage distribution, in East Germany in the upper part of the wage distribution. While residual wage inequality accounted for two-thirds of rising wage inequality in West Germany, in East Germany price effects dominated. In West Germany the group of workers with low tenure experienced higher inequality.

Keywords: Education, tenure, skill composition, wage inequality, wage rigidity

JEL Classification: J21, J24, J31

Suggested Citation

Gernandt, Johannes and Pfeiffer, Friedhelm, Rising Wage Inequality in Germany (April 2006). ZEW - Centre for European Economic Research Discussion Paper No. 06-019; SOEPpaper, No. 14. Available at SSRN: https://ssrn.com/abstract=894214 or http://dx.doi.org/10.2139/ssrn.894214

Johannes Gernandt (Contact Author)

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Friedhelm Pfeiffer

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany
++49 (0)621/1235-150 (Phone)
++49 (0)621/1235-225 (Fax)

University of Mannheim - Department of Economics

D-68131 Mannheim
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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