Unemployment, Labor Market Transitions, and Residual Wage Dispersion


Fitzenberger, Bernd ; Garloff, Alfred


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URL: http://ub-madoc.bib.uni-mannheim.de/940
URN: urn:nbn:de:bsz:180-madoc-9407
Dokumenttyp: Arbeitspapier
Erscheinungsjahr: 2005
Sprache der Veröffentlichung: Englisch
Einrichtung: Sonstige Einrichtungen > Zentrum für Europ. Wirtschaftsforschung (ZEW)
MADOC-Schriftenreihe: Veröffentlichungen des ZEW (Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Fachgebiet: 330 Wirtschaft
Fachklassifikation: JEL: J64 J31 J21 E24 ,
Normierte Schlagwörter (SWD): Deutschland , Arbeitsmarkt , Lohn , Mindestlohn
Abstract: It is commonplace in the debate on Germany's labor market problems to argue that high unemployment and low wage dispersion are related. This paper analyses the relationship between unemployment and residual wage dispersion for individuals with comparable attributes. In the conventional neoclassical point of view, wages are determined by the marginal product of the workers. Accordingly, increases in union minimum wages result in a decline of residual wage dispersion and higher unemployment. A competing view regards wage dispersion as the outcome of search frictions and the associated monopsony power of the firms. Accordingly, an increase in search frictions causes both higher unemployment and higher wage dispersion. The empirical analysis attempts to discriminate between the two hypotheses for West Germany analyzing the relationship between wage dispersion and both the level of unemployment as well as the transition rates between different labor market states. The findings are not completely consistent with either theory. However, as predicted by search theory, one robust result is that unemployment by cells is not negatively correlated with the within–cell wage dispersion.
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Fitzenberger, Bernd und Garloff, Alfred (2005) Unemployment, Labor Market Transitions, and Residual Wage Dispersion. [Arbeitspapier]
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