Dissecting Between‐Plant and Within‐Plant Wage Dispersion: Evidence from Germany

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.

Decoupling of wages from productivity: what implications for public policies?

“…8. This is in line with existing studies on the role of trade on wage inequality based on matched employer-employee data in individual countries, including Germany and Brazil (Baumgarten et al, 2016;Helpman et al, 2017). 9.…”

“…the measure of wage dispersion used in the aggregate analysis. This is consistent with a large body of evidence based on linked employer-employee data suggesting that between-firm wage divergence is a key explanation of wage divergence across individual workers, including for Brazil (Helpman et al, 2017), Denmark (Bagger et al, 2013), Germany (Baumgarten et al, 2016;Card et al,2013;Goldschmidt and Schmieder, 2015), Italy (Card et al, 2014), Portugal (Card et al, 2016), Sweden (Skans et al, 2009), United Kingdom (Faggio et al, 2010) and the United States (Dunne et al, 2004;Barth et al, 2016;Song et al, 2015).…”

Firm Wage Premia, Industrial Relations, and Rent Sharing in Germany

“…On average, plants covered by a collective agreement have a higher value added per worker (Mueller 2011) and also pay higher wages (Gürtzgen 2009). Furthermore, studies by Dustmann, Ludsteck, and Schönberg (2009), Biewen and Seckler (2019), and Baumgarten, Felbermayr, and Lehwald (2020) have found that declining collective bargaining coverage can account for a substantial part of the rise in German wage inequality. Yet, evidence on these links between collective bargaining coverage and wages does not necessarily carry over to plant wage premia.…”

Die Lohnungleichheit von Vollzeitbeschäftigten in Deutschland: Rückblick und Überblick

“…Die Ungleichheit scheint bei seit 2011 real ansteigenden Löhnen weitestgehend stabil zu sein. In den Analysen von Baumgarten et al (2020) und Möller (2016) sind es die Unterschiede zwischen den Firmen, welche auf den Verlauf der Ungleichheit -Anstieg und anschließende Stagnation -den stärksten Einfluss haben.…”