Skill wage premia, employment, and cohort effects in a model of German labor demand

Abstract

"Operationalizing the relationship between employment and wage structures, Card and Lemieux (2001) analyze skill wage differentials in a supply and demand framework that includes age as an additional important dimension of heterogeneity. Our paper extends this analytical framework and confronts it with the IAB employment subsample (IABS) data for Germany. 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 employment. Compared to estimates in the related litera- ture, our estimated elasticities are rather high. 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 8.7 to 12.3% and are the higher the lower the employees' skill level." (Author's abstract, IAB-Doku) ((en))

Cite article

Fitzenberger, B. & Kohn, K. (2004): Skill wage premia, employment, and cohort effects in a model of German labor demand. Nürnberg, 35 p.