Skill Wage Premia, Employment, and Cohort Effects: Are Workers in Germany All of the Same Type?


Fitzenberger, Bernd ; Kohn, Karsten


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URL: http://ub-madoc.bib.uni-mannheim.de/1368
URN: urn:nbn:de:bsz:180-madoc-13680
Document Type: Working paper
Year of publication: 2006
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: J21 E24 J31 ,
Subject headings (SWD): Deutschland <Westliche Länder> , Nürnberg / Institut für Arbeitsmarkt- und Berufsforschung , Arbeiter , Fertigkeit , Arbeitsmarkt
Abstract: 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.
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Fitzenberger, Bernd ; Kohn, Karsten (2006) Skill Wage Premia, Employment, and Cohort Effects: Are Workers in Germany All of the Same Type? Open Access [Working paper]
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