DP3009 Wage Rigidities in Western Germany: Microeconometric Evidence from the 1990s

Author(s): Patrick A Puhani
Publication Date: October 2001
Keyword(s): Germany, identification, rigidities, unemployment, wages
JEL(s): J31, J64
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3009

This Paper investigates whether and in what sense the west German wage structure has been ‘rigid’ in the 1990s. To test the hypothesis that a rigid wage structure has been responsible for rising low-skilled unemployment, I propose a methodology that makes less restrictive identifying assumptions than some previous related work. I find that market forces justified the relative stability of educational wage premia. Relative wages did not, however, respond to negative net demand shocks for young workers and white-collar workers.