Abstract
The present paper applies regression-based decomposition methods to analyse the impact of worker-, plant-, region-, and sector-specific determinants on the level and the continuous increase in wage inequality between 1995 and 2007 in Germany. Almost the entire increase in wage inequality is explained by this approach. Altogether, changes in the composition of wage determinants are minor compared to changes in their returns. In particular, occupation-specific skills are the most important wage determinant. Changes in the age structure, unemployment rates, and the plant size premium in combination with assortative matching are also important factors that contribute to the rise in wage inequality.
Published Version
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