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Author Fitzenberger, Bernd ♦ Kohn, Karsten
Source EconStor
Content type Text
Publisher Institute for the Study of Labor (IZA)
File Format PDF
Language English
Subject Domain (in DDC) Social sciences ♦ Economics
Subject Keyword labor demand ♦ heterogeneity ♦ age ♦ skill ♦ wage structure ♦ employment ♦ cohort effects ♦ unemployment ♦ Labor Force and Employment, Size, and Structure ♦ Wage Level and Structure; Wage Differentials ♦ Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
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.
Part of series IZA Discussion Papers x2185
Learning Resource Type Article
Publisher Date 2006-01-01
Publisher Place Bonn
Rights Holder http://www.econstor.eu/dspace/Nutzungsbedingungen