Wage flexibility and employment performance

Abstract

"The paper analyses the hypothesis that structural unemployment in Germany has risen because rigid relative wages hindered the necessary adjustments in the face of a substantial shift in demand against the unskilled. Observing that the descriptive evidence is inconclusive, we develop a theoretical framework with imperfect competition on the labor market that enables us to investigate the wage and employment dynamics for narrowly de¿ned age-by-educationby- industry cells. Using a large micro data set, we present SUR cross-section estimates of the employment and wage equations derived from this model. Our results indicate that wages of male workers did respond to relative labor demand shifts, and this reaction was strong enough to prevent corresponding changes in the employment structure. For female workers, however, the evidence is more supportive to a rigidity explanation of their poor labor market performance." (Author's abstract, IAB-Doku) ((en))

Cite article

Beissinger, T. & Möller, J. (1998): Wage flexibility and employment performance. A microdata analysis of different age-education groups in German industries. (Regensburger Diskussionsbeiträge 307), Regensburg, 38 p.