Search IMF Staff Papers

Advanced Search
Journal Description

Editorial Committee

How to Subscribe

Forthcoming Articles

Staff Papers Archive

Copyright Information

Research at the IMF

Free Email Notification

Receive emails when we post new items of interest to you.

Subscribe or Modify your profile

IMF Staff Papers Logo    Last updated: August 2004
Volume 51, Number 2
The Unbearable Stability of the German Wage Structure: Evidence and Interpretation
Eswar S. Prasad

Full Text of this Article (PDF 162K)

This paper uses micro data from the German Socio-Economic Panel to document that the wage structure in West Germany was remarkably stable over the period 1984-97, with little variation over time in wage or earnings inequality among and within different skill groups. The paper investigates a number of possible explanations for the stability of the wage structure and concludes that it is attributable to institutional factors rather than market forces. Consequently, the rigidity of relative wages despite relative shifts in labor demand that favor skilled workers has resulted in sharp declines in employment rates for unskilled workers. The micro evidence is also shown to have important implications for interpreting trends in wage shares, capital-labor ratios, and aggregate unemployment. [JEL J31, E24]