This project investigated the evolution of the wage distribution and wage inequality (since 1994), both for East and West Germany, based on samples from the German Socio-Economic Panel (GSOEP) from 1984 to 2004, Between 1984 and 1994 wages for prime age dependent male workers on average increased by 23 percent and the wage distribution in West Germany was fairly stable. Between 1994 and 2004 average wage growth was 8 percent in West Germany and 28 percent in East Germany. In this period wage inequality for prime age dependent males, measured by the ratio of the ninetieth to tenth percentile of the wage distribution, increased from 2.1 to 2.5 in West Germany and from 2.3 to 2.9 in East Germany. In West Germany rising wage inequality has occurred mainly in the lower part of the wage distribu-tion, whereas in East Germany it has occurred predominantly in the upper part of the wage distri-bution. In West Germany the group of workers with low tenure experienced higher increases in wage inequality. Further results stem from the econometric decomposition of the changes in wage inequality into changes in the prices for observable characteristics (educational qualification, tenure, age and the like), changes in the composition of the workforce and unobserved or residual wage inequality.

Selected Publications

Articles in Refereed Journals

Gernandt, Johannes and Friedhelm Pfeiffer (2006), Einstiegslöhne bei unvollkommenen Arbeitsmärkten, Perspektiven der Wirtschaftspolitik 7 (2), 147-172.

Discussion and Working Papers

Gernandt, Johannes and Friedhelm Pfeiffer (2006), Rising Wage Inequality in Germany, ZEW Discussion Paper No. 06-019, Mannheim. Download

Project duration

01.08.2005 - 31.07.2006

Project members

PD Dr. Friedhelm Pfeiffer (Coordinator)
Dr. Johannes Gernandt

Cooperation partner

PD Dr. Alexander Kemnitz, Universität Mannheim
Prof. Dr. Winfried Pohlmeier, Universität Konstanz, Konstanz, DE
Prof. Christian Dustmann Ph.D., University College London
Prof. David Autor, Ph.D, MIT, Cambridge, Ma.