Skills and wage inequality in Greece: evidence from matched employer-employee data, 1995-2002

This paper examines changes in the Greek wage distribution over 1995-2002 and the role of skills in these changes using a matched employer-employee data set. This data set enables us to account for firm heterogeneity and obtain a more refined picture of the impact of skills. The methodology adopted is the Machado-Mata decomposition technique, which separates the part of wage changes that is due to changes in the job/employer and employee characteristics from the part due to changes in the returns to these characteristics. Our results indicate that the role of skills has been decisive. The skill return effects in combination with the composition effects of tenure, which are arguably responsive to economic developments and market conditions, have had an important contribution to the changes in the Greek wage distribution. On the other hand, the impact of predetermined demographic changes, as those captured by the age and education composition effects, has been relatively milder. JEL Classification: J31quantile regression, Returns to skill, Wage inequality

Markups in the euro area and the US over the period 1981-2004: a comparison of 50 sectors

This paper provides estimates of price-marginal cost ratios or markups for 50 sectors in 8 euro area countries and the US over the period 1981-2004. The estimates are obtained applying the methodology developed by Roeger (1995) on the EU KLEMS March 2007 database. Five stylized facts are derived. First, perfect competition can be rejected for almost all sectors in all countries; markup ratios are generally larger than 1. Second, average markups are heterogenous across countries. Third, markups are heterogeneous across sectors, with services having higher markups on average than manufacturing. Fourth, services sectors generally have higher markups in the euro area than the US, whereas the pattern is the reverse for manufacturing. Fifth, there is no evidence that there is a broad range change in markups from the eighties to the nineties. JEL Classification: D3, L11marginal cost, markup, price

Skills and wage inequality in Greece: evidence from matched employer-employee data, 1995-2002

This paper examines changes in the Greek wage distribution over 1995-2002 and the role of skills in these changes using a matched employer-employee data set. This data set enables us to account for firm heterogeneity and obtain a more refined picture of the impact of skills. The methodology adopted is the Machado-Mata decomposition technique, which separates the part of wage changes that is due to changes in the job/employer and employee characteristics from the part due to changes in the returns to these characteristics. Our results indicate that the role of skills has been decisive. The skill return effects in combination with the composition effects of tenure, which are arguably responsive to economic developments and market conditions, have had an important contribution to the changes in the Greek wage distribution. On the other hand, the impact of predetermined demographic changes, as those captured by the age and education composition effects, has been relatively milder.Returns to skill; Wage inequality; Quantile regression

The parental home as labour market insurance for young Greeks during the crisis

Labour market conditions in Greece have severely deteriorated during the crisis, affecting youths the most. Using the Greek crisis as a case-study, this paper examines the role of the family as a social safety net for its young members. Specifically, we test the relationship between youth labour outcomes and parental coresidence, whether this relationship has become stronger during the crisis, and the degree to which the relationship is causal. Our results confirm that the parental home is a refuge both for jobless youth and for those in poorly paid, insecure jobs, and this role has intensified during the crisis. We find no reverse causality between co-residence and employment status for young men, and significant reverse causality for women. This finding implies that all youths live in the parental home when they are in need themselves, but it is young women not men who live with parents when parents are in need or for cultural reasons

Two tales of wage adjustment

It is well known that in the last five years Greek wages have collapsed both in the public and in the private sector. What is perhaps less known, owing in part to the attention of much of the policy debate on the cuts in the public sector, is that the wage adjustment in the two sectors has been equally deep. In fact, the private sector experienced if anything more radical changes in its pay-structure, with elements of increasing commodification, while the public sector continues to offer advantageous wages to privileged groups, despite the policy focus on the “rationalization” of pay in the sector

Did the crisis make the Greek economy less inefficient? Evidence from the structure and dynamics of sectoral premia

It is generally understood that the Greek economy has long been characterised by a range of structural and institutional inefficiencies – which, arguably, are at least partly responsible for the crisis that engulfed the country since 2009. In turn, the crisis has also led to a significant adjustment of the Greek economy, both behaviourally (e.g., with regard to labour supply) and institutionally (e.g., with regard to labour market regulations). In this paper we ask whether this adjustment has helped resolve some of the inefficiencies that characterised the Greek economy in the past. We focus on the particular case of sectoral wage premia and examine (a) whether these did indeed reflect economic inefficiency in the past and (b) whether they have declined systematically since the crisis. Sectoral wage premia are generally linked to unobserved worker heterogeneity and compensating differentials (in a competitive framework) or to market distortions, such as monopsony power or information asymmetries (in an imperfect markets framework). Our results show that sectoral premia in Greece are only weakly linked to unobserved worker heterogeneity, but strongly linked to non-competitive factors reflecting market inefficiency. Looking at three such factors – the availability of rents (as measured by sectoral profitability), the potential for rents (measured via a proxy for intra-sectoral competition) and workers’ ability to extract such rents (measured by the share of public sector jobs) – we find that the crisis altered the relative contribution of such factors but did not lead to a decline in sectoral premia on the whole. Indeed, wage premia appear to have increased in the least competitive sectors while the overall disparity of wages across sectors increased. We conclude that market inefficiencies, as manifested by the presence of unaccounted-for sectoral wage differentials, intensified despite all policy efforts in the opposite direction

Public-private wage duality during the Greek crisis

During the recent crisis, Greece experienced a severe contraction and rapid transformation in its labour relations and pay-setting system in both the private and public sectors. Although the quantity (employment) adjustments that followed have been well documented, the changes that were triggered in the wage structures of the two sectors remain largely unexplored. In this article we examine these changes using Greek Labour Force Survey micro-data. We find a differential adjustment across sectors in terms of magnitude, timing, and structure. Despite general perceptions, adjustment in public sector wages has been slow and limited, with pre-crisis premia persisting throughout the period. Instead, the private sector recorded substantial adjustment, changing noticeably its valuation of worker and job characteristics and emerging from the crisis with a structure of returns that rewards more intensively marketable skills. This may be an important feature in the prospective recovery of the Greek economy

Changes in the wage structure in EU countries

We study changes in the wage structures in nine EU countries over 1995-2002 and the role of demand, supply and institutional developments in shaping these changes. Using comparable cross-country microeconomic data, we compute for each country and at each decile of the wage distribution, the part of the observed wage change that is due to changes in the composition of workers, employers, and jobs’ characteristics, and the part due to changes in the returns to these characteristics. We find that composition effects derived from changes in age, gender or education of the labour force, largely exogenous to economic developments, had a minor contribution to the observed wage dynamics. In contrast, return and composition effects from characteristics likely driven by economic developments are found most relevant to explain the observed changes. We relate wages and their various components with macroeconomic and institutional trends and find that technology and globalisation are associated with wage increasesmigration is associated with declines in wageswhereas the effect of labour market institutions has been mixe

Who saved Greek youth? Parental support to young adults during the great recession

We use data from the Greek Labour Force Survey to calculate, by region and year, the share of youths who coreside with their parents as a proxy of mutual dependence between parents and adult children, and the share of youths who coreside with their parents and also receive cash transfers as a proxy of one-way dependence of youths on parents. Using panel data analysis, we examine the correlation of each variable with the youth unemployment rate. We find that familial interdependence was strong before the crisis and intensified further during the crisis while at the same time it was transformed from two- to one-directional. Parents stepped in to shelter unemployed and vulnerable youths, mostly young men, and did so by providing housing rather than cash