Abstract
Using rich linked employer–employee data for (West) Germany between 1996 and 2014, we conduct a decomposition analysis based on recentered influence function (RIF) regressions to analyze the relative contributions of various plant and worker characteristics to the rise in German wage dispersion. Moreover, we separately investigate the sources of between‐plant and within‐plant wage dispersion. We find that industry effects and the collective bargaining regime contribute the most to rising wage inequality. In the case of collective bargaining, both the decline in collective bargaining coverage and the increase in wage dispersion among the group of covered plants have played important roles.
Highlights
Wage inequality has been on the rise in most countries in the last few decades (Acemoglu and Autor, 2011)
Recent research has pointed to the growing importance of workplace heterogeneity for this development: a large fraction of the increase in overall wage inequality is due to increased wage dispersion between as opposed to within firms or plants
Before discussing the detailed decomposition results of changes in wage dispersion, we provide descriptive evidence on changes in the composition of workers and plants as well as changes in the wage structure related to worker and plant characteristics
Summary
Wage inequality has been on the rise in most (industrialized) countries in the last few decades (Acemoglu and Autor, 2011). In terms of individual-level characteristics, education is the one that matters the most where both employment shifts towards more highly skilled workers and, even more so, changes in the skill-related wage structure, in the wage gap between high-educated and low-educated workers, have played important roles They contributed to both within-plant and between-plant wage dispersion. In line with most earlier studies, Dustmann et al (2009) mostly rely on plain individual-level data, the bargaining status of the plant being the only plant-level characteristic considered Building upon these results, first Antonczyk et al (2010) and, very recently, Biewen and Seckler (forthcoming) have conducted decomposition analyses of the increase in German wage dispersion using linked employer-employee data and accounting for several.
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