Rising Wage Dispersion, After All ! The German Wage Structure at the Turn of the Century

Using register data from the IAB employment sample, this paper studies the wage structure in the German labor market throughout the years 1992{2001. Wage dispersion has generally been rising. The increase was more pronounced in East Germany and occurred predominantly in the lower part of the wage distribution for women and in the upper part for men. Censored quantile wage regressions reveal diverse age and skill patterns. Applying Machado/Mata (2005)-type decompositions I conclude that differences in the composition of the work force only had a small impact on the observed wage differentials between East and West Germany, but changes in the characteristics captured better parts of the observed wage changes over time. --Wage inequality,censored quantile regression,Machado/Mata decomposition,IABS,East Germany,West Germany

What's the Difference?! Gender, Personality, and the Propensity to Start a Business

Women start fewer businesses than men. The start-up rate among women in Germany falls short of males' start-up rate by one third. We scrutinize this gender gap using individual-level data from the KfW Start-up Monitor, a large-scale population survey on start-up activity in Germany. As a unique feature, the data combine socio-demographic characteristics, entrepreneurship-related attitudes, and general personality traits of both business starters and non-starters. Estimating binary choice models and employing decomposition techniques, we find that gender differences in socio-demographics alone would even be in favor of higher start-up rates among women, while the distribution of personality traits is less favorable for business start-ups among women and explains about one third of the entire gender difference. Most substantially, men opt for a start-up more often even given identical human capital and related endowments. Qualificational policies targeted towards higher educational attainments of potential entrepreneurs do thus not suffice to increase the number of female business starters.entrepreneurship, gender difference, start-up propensity, decomposition analysis, KfW Start-up Monitor, Germany

Skill wage premia, employment, and cohort effects: are workers in Germany all of the same type?

This paper studies the relationship between employment and wage structures in West Germany based on the IAB employment subsample 1975{1997. It extends the analytical framework of Card and Lemieux (2001) which simultaneously includes skill and age as important dimensions of heterogeneity. After having identified cohort effects in skill wage premia and in the evolution of relative employment measures, we estimate elasticities of substitution between employees in three different skill groups and between those of different age, taking account of the endogeneity of wages and employment. Compared to estimates in the related literature, we find a rather high degree of substitutability. Drawing on the estimated parameters, we simulate the magnitude of wage changes within the respective skill groups that would have been necessary to halve skill-specific unemployment rates in 1997. The required nominal wage reductions range from 8.8 to 12.2% and are the higher the lower the employees' skill level. --Labor Demand,Heterogeneity,Age,Skill,Wage Structure,Employment,Cohort Effects,Unemployment

Wage Distributions by Bargaining Regime: Linked Employer-Employee Data Evidence from Germany

Using linked employer-employee data from the German Structure of Earnings Survey 2001, this paper provides a comprehensive picture of the wage structure in three wage-setting regimes prevalent in the German system of industrial relations. We analyze wage distributions for various labor market subgroups by means of kernel density estimation, variance decompositions, and individual and firm-level wage regressions. Unions' impact through collective and firm-level bargaining mainly works towards a higher wage level and reduced overall and residual wage dispersion. Yet observed effects are considerably heterogeneous across different labor market groups. There is no clear evidence for wage floors formed by collectively bargained low wage brackets which would operate as minimum wages for different groups of workers.Collective wage bargaining, wage structure, kernel density estimation, variance decomposition, wage equations, German Structure of Earnings Survey

Rising Wage Dispersion, After All ! : The German Wage Structure at the Turn of the Century

Using register data from the IAB employment sample, this paper studies the wage structure in the German labor market throughout the years 1992-2001. Wage dispersion has generally been rising. The increase was more pronounced in East Germany and occurred predominantly in the lower part of the wage distribution for women and in the upper part for men. Censored quantile wage regressions reveal diverse age and skill patterns. Applying Machado/Mata (2005)-type decompositions I conclude that differences in the composition of the work force only had a small impact on the observed wage differentials between East and West Germany, but changes in the characteristics captured better parts of the observed wage changes over time

Wage dispersion, trade unions, and heterogeneous labor demand : microeconometric analyses for Germany

The dissertation collects four self-contained essays which contribute to the literature on wage structures, heterogeneous labor demand, and the impact of trade unions. The first paper provides a detailed description of the evolution of wage inequality in East and West Germany in the late years of the twentieth century. In contrast to previous decades, wage inequality has been rising in several dimensions during that period. The second paper identifies cohort effects in the evolution of both wages and employment. Observed structures are consistent with a labor demand framework that incorporates steady skill-biased technical change. Substitutability between skill and age groups in the German labor market is found to be relatively high. Simulations based on estimated elasticities of substitution illustrate that higher wage dispersion between skill groups would have contributed to a reduction in unemployment. The third paper estimates determinants of individual union membership decisions and studies the erosion of union density in East and West Germany. Using corresponding predictions of net union density, the fourth paper analyzes the link between union strength and the structure of wages. A higher union density is associated with lower residual wage dispersion, reduced skill wage differentials, and a lower wage level. This finding is in line with an insurance motive for union action. The thesis comprises the following articles: (1) “Rising Wage Dispersion, After All! The German Wage Structure at the Turn of the Century,” IZA Discussion Paper 2098, April 2006. (2) “Skill Wage Premia, Employment, and Cohort Effects: Are Workers in Germany All of the Same Type?”, IZA Discussion Paper 2185, June 2006, joint with Bernd Fitzenberger. (3) “The Erosion of Union Membership in Germany: Determinants, Densities, Decompositions,” IZA Discussion Paper 2193, July 2006, joint with Bernd Fitzenberger and Qingwei Wang. (4) “Equal Pay for Equal Work? On Union Power and the Structure of Wages in West Germany, 1985–1997,” translation of “Gleicher Lohn für gleiche Arbeit? Zum Zusammenhang zwischen Gewerkschaftsmitgliedschaft und Lohnstruktur in Westdeutschland 1985–1997,” Zeitschrift für Arbeitsmarkt-Forschung, 38 (2/3), 125-146, joint with Bernd Fitzenberger, 2005.Die vorliegende Arbeit basiert auf vier eigenständigen Aufsätzen, die sich dem Spannungsfeld von Lohnstrukturen, heterogener Arbeitsnachfrage und Gewerkschaftsmacht auf dem deutschen Arbeitsmarkt mit Hilfe mikroökonometrischer Methoden nähern. Der erste Aufsatz zeichnet ein detailliertes Bild der Entwicklung der Lohnungleichheit in Ost- und Westdeutschland in den Jahren des ausgehenden 20. und des beginnenden 21. Jahrhunderts. Im Gegensatz zur Stabilität der Lohnstruktur in früheren Jahrzehnten hat die Lohnungleichheit über den betrachteten Zeitraum hinweg entlang verschiedener Dimensionen zugenommen. Der zweite Aufsatz untersucht den Zusammenhang zwischen Lohnstrukturen und Beschäftigung im Rahmen eines Arbeitsnachfragemodells für Westdeutschland, welches Alter und Qualifikationsniveau der Beschäftigten als wichtige Dimensionen der Heterogenität des Faktors Arbeit inkorporiert und Kohorteneffekte sowie qualifikationsverzerrten technischen Fortschritt berücksichtigt. Die Substituierbarkeit zwischen Qualifikations- und Altersklassen auf dem deutschen Arbeitsmarkt erweist sich als relativ hoch. Auf geschätzten Substitutionselastizitäten basierende Simulationen illustrieren, dass eine höhere Lohndispersion zwischen den Qualifikationsklassen zu einer verringerten Arbeitslosigkeit beitragen kann. Der dritte Aufsatz wendet sich der Entwicklung der Gewerkschaftsmitgliedschaft als einer zentralen Arbeitsmarktinstitution zu. Es werden individuelle Determinanten der Gewerkschaftsmitgliedschaft geschätzt und die rückläufigen Organisationsgrade in Ost- und Westdeutschland untersucht. Das letzte Kapitel der Dissertation verwendet daraufhin entsprechend geschätzte Organisationsgrade zur Untersuchung des Gewerkschaftseinflusses auf die Lohnstruktur in Westdeutschland. Ein höherer Nettoorganisationsgrad geht einher mit einer geringeren residualen Lohndispersion, niedrigeren Qualifikationsprämien und einem geringeren Lohnniveau. Dieses Ergebnis entspricht einem Versicherungsmotiv für die Aktivität von Gewerkschaften, welche ein starkes Gleichheitsziel verfolgen und, um negative Beschäftigungseffekte zu vermeiden, dabei Einbußen in Hinblick auf das Lohnniveau in Kauf nehmen

The KfW/ZEW Start-up Panel: Design and Research Potential

So far, there has been no data set which observes firm formations in Germany not only on a cross-sectional basis using one-time surveys, but continuously over a number of years. Therefore, the Centre for European Economic Research (ZEW), KfW Bankengruppe and Creditreform set up a panel study of newly founded firms in Germany: the KfW/ZEW Start-up Panel. In each of the yearly panel waves computer-aided telephone interviews (CATI) are conducted with about 6,000 start-up firms from almost all industries. The KfW/ZEW Start-up Panel will for the first time enable profound analyses of the temporal development of newly founded firms, including studies of firm survival. This paper describes the design of the KfW/ZEW Start-up Panel. The survey’s research potential is illustrated using data from the first panel wave conducted in the year 2008. Data access for external researchers and data protection issues of the confidential micro data are discussed.firm foundation, micro data, firm data, panel data, Germany

The Erosion of Union Membership in Germany: Determinants, Densities, Decompositions

Union density in Germany has declined remarkably during the last two decades. We estimate socio-economic and workplace-related determinants of union membership in East and West Germany using data from the German Socio-Economic Panel by means of Chamberlain-Mundlack correlated random effects probit models. Drawing on the estimates, we project net union densities (NUD) and analyze the differences between East and West Germany as well as the corresponding changes in NUD over time. Blinder-Oaxaca decompositions show that changes in the composition of the work force have only played a minor role for the deunionization trends in East and West Germany. In East-West comparison, differences in the characteristics of the work force reflect a lower quality of membership matches in East Germany right after German unification. --Union membership,union density,correlated random effects probit model,decomposition analysis,East Germany,West Germany

The Interdependence of R&D Activity and Debt Financing of Young Firms

We investigate the interdependence of debt financing and R&D activities of young firms. Using micro-level data of the KfW/ZEW Start-up Panel, our estimation results show that firm characteristics are more important than personal characteristics of the founders for explaining young firms' leverage, whereas firm characteristics and human capital of both founders and employees heavily influence R&D intensity. Applying a bivariate Tobit model, we find that there is a positive interdependent relationship between the share of loan financing and R&D intensity. A higher share of loan financing allows for more R&D in young firms and, at the same time, a higher R&D intensity allows for a higher loan share. This relationship cannot be detected by merely estimating single-equation models for R&D intensity and debt financing.innovation financing, capital structure, business start-ups, KfW/ZEW Start-up Panel, Germany

Understanding inter-industry wage structures in the euro area

This paper focuses on the euro area wage structure and its potential determinants from a sectoral viewpoint. Merging information from the OECD Structural Analysis database with data from the EU Labour Force Survey, we construct a cross-country panel of 22 industries in 8 euro area countries for 1991-2002. Data inspection confirms the existence of a fairly stable inter- industry wage structure that is similar across countries. We then apply panel data techniques to identify factors explaining inter-industry wage differentials in the euro area. Both workforce characteristics (e.g., human capital variables) and firm-related characteristics (e.g., capital intensity, productivity) contribute significantly. However, considerable wage heterogeneity across sectors remains. Idiosyncratic sector and country specifics, reflecting different sociocultural and institutional backgrounds, appear to bear a major role. While our paper only uses direct evidence from workforce and firm-related characteristics, we also try to relate the remaining heterogeneity to institutional characteristics, based on available relevant literature. JEL Classification: J31, J24, J51euro area, firm and workforce characteristics, inter-industry wage differentials, Labour market institutions, panel estimation