Using a large administrative data set, a recent study by Dustmann, Ludsteck, and Schönberg [2009] finds convincing evidence for rising wage inequality in West Germany during the past three decades. Their paper shows that the increase occurred above the median during the 1980s, and was augmented by rising inequality below the median in the 1990s. These results challenge the pervasive conception of the German wage structure being a paragon of stability.
Within the scope of this seminar paper, I replicate parts of their analysis using a different data set, namely the German Socio-Economic Panel (GSOEP) for the period from 1984 to 2009. Using monthly and hourly earnings constructs, I assess the extent to which the results of Dustmann, Ludsteck, and Schönberg [2009] can be recovered from GSOEP data. I do so by exploring the wage distribution along several dimensions. In addition to this, I analyze composition-constant counterfactual wage densities using the kernel density reweighting method advanced by DiNardo, Fortin, and Lemieux [1996]. A provisional evaluation of my results suggests that I can confirm the majority of findings of the original paper along a qualitative dimension. A quantitative assessment, however, reveals considerable deviations.
Table of Contents
I. INTRODUCTION
II. DATA DESCRIPTION
a. The Data
b. Sample Selection
c. Variable Specification
III. EMPIRICAL ANALYSIS
a. Basic Facts of the German Wage Distribution: Some Measures of Inequality
b. Why did Wage Inequality Increase? The Effect of Prices and Composition
IV. SUMMARY AND CONCLUSIONS
Objectives and Topics
This paper aims to replicate and extend the findings of Dustmann, Ludsteck, and Schönberg (2009) regarding the evolution of wage inequality in West Germany, utilizing data from the German Socio-Economic Panel (GSOEP) for the period 1984 to 2009 to examine shifts in the wage distribution and the impact of workforce compositional changes.
- Analysis of wage distribution trends across different percentiles (90th, 50th, 10th).
- Comparison of male and female wage inequality patterns.
- Decomposition of wage inequality using the kernel density reweighting method.
- Evaluation of the impact of changing workforce age and education structures.
- Reconciliation of descriptive wage trends with previous research on the German labor market.
Excerpt from the Book
b. Sample Selection
From the GSOEP database, I select my sample in a specification that resembles the sample characteristics of DLS as closely as possible. Specifically, I draw annual cross-sections (corresponding to choosing the option ‘unbalanced panel’) for the GSOEP samples A (‘German West’) and B (‘Foreigner West’), since my focus is on the wage development in West Germany. I include non-private households and both genders, enabling me to discern potential differences in the dynamics and magnitude of wage inequality between genders.
The analysis necessitates further restrictions on the sample. Specifically, DLS only include workers between 21 and 60 years of age who are full-time employed (above 30 weekly working hours) and are not registered in an apprenticeship in the respective sampling year. I sequentially impose these restrictions while keeping track of the number of observations for men and women with available wage data. To begin with, my sample contains 132,767 person-year observations. In a first round of data manipulation, I delete all observations for which either no information on the attained level of education is available (29,238 observations) or which reported to be still ‘In School’ at the time of survey (1,893 observations). This leaves 101,636 individual observations in the sample, out of which approximately 60 per cent (61,292) have non-missing data on wages.
Summary of Chapters
I. INTRODUCTION: Provides the research motivation by discussing secular changes in wage distribution and introducing the study by Dustmann, Ludsteck, and Schönberg (2009) as the baseline for replication.
II. DATA DESCRIPTION: Details the usage of the GSOEP data, the sample selection process, and the specific construction of variables like wages and education groups for the empirical analysis.
III. EMPIRICAL ANALYSIS: Presents the main findings through descriptive statistics on wage inequality and applies a kernel density reweighting method to isolate the effects of workforce compositional changes.
IV. SUMMARY AND CONCLUSIONS: Concludes the paper by synthesizing the empirical results, comparing them with the original study, and reflecting on the limitations and implications for future research.
Keywords
Wage inequality, GSOEP, West Germany, labor economics, kernel density reweighting, decomposition analysis, wage distribution, skill groups, workforce composition, labor market, wage structure, earnings, job polarization, unionization, empirical analysis
Frequently Asked Questions
What is the primary focus of this research paper?
The paper focuses on replicating and extending the study by Dustmann, Ludsteck, and Schönberg regarding the evolution of wage inequality in West Germany from 1984 to 2009 using GSOEP data.
What are the central thematic fields covered?
The core themes include wage distribution dynamics, the impact of workforce composition (age/education) on inequality, and the decomposition of wage trends.
What is the primary research goal?
The goal is to determine if the findings of the original 2009 study can be supported using different survey data (GSOEP) and to assess how much of the observed wage inequality change is due to mechanical compositional effects.
Which scientific method is primarily employed?
The paper uses descriptive statistical analysis and the kernel density reweighting method to perform a counterfactual decomposition of wage densities.
What is the main topic of the empirical analysis?
The empirical analysis examines trends in wage percentiles and utilizes decomposition techniques to understand how changes in the workforce's age and education distribution affect overall wage inequality.
Which keywords best characterize this work?
Key terms include wage inequality, GSOEP, West Germany, kernel density reweighting, labor economics, and workforce composition.
How does the author handle the missing data in the student version of the GSOEP?
The author uses imputation procedures to address missing values and focuses on person-year observations after strict sample selection to ensure consistency.
What is the specific finding regarding the 2000s for women?
The paper identifies a dramatic increase in wage inequality along the entire distribution for women during the 2000s, partially driven by wage compression at the bottom and gains at the top.
How does the author explain the failure of composition changes to account for 2008 wage trends?
The author suggests that changes in workforce composition either did not occur on a sufficient scale or that these changes did not significantly influence the wage structure during that specific period.
- Arbeit zitieren
- Benjamin Bruns (Autor:in), 2013, Revisiting the German Wage Structure, München, GRIN Verlag, https://www.grin.com/document/232030
