Inter-Industry Wage Differentials In EU Countries: What Do Cross-Country Time Varying Data Add to the Picture?

Abstract

This paper empirically investigates the changes in inter-industry wage differentials between 1995 and 2002 across a number of EU countries: Belgium, Germany, Greece, Hungary, Ireland, Italy, Netherlands, and Spain. Our focus is to investigate the extent to which these inter-industry wage differentials and their evolution have been driven by macroeconomic developments such as competitiveness and exposure to international trade or to labour market institutions. We also investigate the importance of sectors' ability to pay and unobserved workers' ability as potential determinants of inter-industry wage differentials. Wage differentials are estimated using the so called Structure of Earnings Survey data (SES); a unique dataset of matched employer-employee data, collected from a large sample of firms in each country and comparable across countries. The paper provides evidence of the existence and persistence of industry wage differentials in European countries, additionally it does not find any indication of unobserved ability being one of the determinants. The initial regression results attempting to explain the change in the differentials between the two points in time suggest that there is some correlation with labour market developments, but also with the ability of industries to pay higher wages.Keywords: inter-industry wage differentials JEL Classification: J31, J41 * This paper is part of the Wage Dynamic Network (WDN) research. We are very grateful to our WDN colleagues for their comments and support. The support and help of Frank Smets and of our ECB colleagues in DG-Statistics were essential to gain access to five of the SES data sets used in the paper. We are also grateful to Rebekka Christopoulou who provided excellent research assistance and to Andrew McCallum and Ladislav Wintr for initial help with the data.

the impact of national economy structural transformation on regional employment and income: the case of Latvia

“…The results obtained in this research regarding the income differences between the industries of national and/or regional economies are consistent with evidence from Eastern and Western Europe -notable wage differences exist across industries of a national economy (Magda et al 2011;Du Caju et al 2010). In addition, Magda et al (2011) andDu Caju et al (2010) agree that the industries with the highest income are similar across European countries and are related to oil and gas extraction, nuclear power, chemicals, mining and quarrying, production and distribution of electricity/gas/water, air transport, finances and ICT, while the industries with the lowest income are traditional industries, including among others the clothing industry, woodwork, as well as trade, hospitality and catering activities.…”

“…In addition, Magda et al (2011) andDu Caju et al (2010) agree that the industries with the highest income are similar across European countries and are related to oil and gas extraction, nuclear power, chemicals, mining and quarrying, production and distribution of electricity/gas/water, air transport, finances and ICT, while the industries with the lowest income are traditional industries, including among others the clothing industry, woodwork, as well as trade, hospitality and catering activities. In Latvia, low-income industries (see Figure 2), in which the average income is below the average regional level, also include trade, hospitality and catering activities (G, I), as well as education (P) and other services (R-U), which are marked out particularly in all regions.…”

The effect of trade and FDI on inter-industry wage differentials: The case of Mexico

“…sector level competition is negatively associated with inter-industry wage differentials. Lamo, Nicolitsas and Poelhekke (2010); and for segmentation theories, see Osterman (1975) and McNabb (1987). 5 For an overview of the competitive and non-competitive theories, see Groshen (1991a), and Osburn (2000).…”

Does institutional diversity account for pay rules in Germany and Belgium?

“…The WASD, initially developed by Krueger and Summers (1988) and further refined by Haisken-DeNew and Schmidt (1997), is a common summary statistic in the literature on inter-industry, regional and occupational wage differentials (see e.g. Lucifora, 1993;Rycx, 2002;Du Caju et al, 2010;Magda et al, 2011). The WASD based on three job categories are shown in Table 3.…”