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Econometrics 2018, 6(2), 20; https://doi.org/10.3390/econometrics6020020

Polarization and Rising Wage Inequality: Comparing the U.S. and Germany

1
Research Fellow, IZA, 53113 Bonn, Germany
2
Georgetown University, Washington DC, 20057, USA
3
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138, USA
4
School of Business and Economics, Humboldt University Berlin, Spandauer Strasse 1, 10099 Berlin, Germany
5
Institute For Fiscal Studies, London WC1E 7AE, UK
6
CESifo, 81679 München, Germany
7
Research Centre for Education and the Labour Market (ROA), 6211 LM Maastricht, The Netherlands
8
Centre for European Economic Research (ZEW), 68161 Mannheim, Germany
*
Author to whom correspondence should be addressed.
Received: 31 January 2018 / Revised: 12 March 2018 / Accepted: 22 March 2018 / Published: 11 April 2018
(This article belongs to the Special Issue Econometrics and Income Inequality)
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Abstract

Since the late 1970s, wage inequality has increased strongly both in the U.S. and Germany but the trends have been different. Wage inequality increased along the entire wage distribution during the 1980s in the U.S. and since the mid 1990s in Germany. There is evidence for wage polarization in the U.S. in the 1990s, and the increase in wage inequality in Germany was restricted to the top of the distribution before the 1990s. Using an approach developed by MaCurdy and Mroz (1995) to separate age, time, and cohort effects, we find a large role played by cohort effects in Germany, while we find only small cohort effects in the U.S. Employment trends in both countries are consistent with polarization since the 1990s. The evidence is consistent with a technology-driven polarization of the labor market, but this cannot explain the country specific differences. View Full-Text
Keywords: wage inequality; polarization; international comparison; cohort study; quantile regression wage inequality; polarization; international comparison; cohort study; quantile regression
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Antonczyk, D.; DeLeire, T.; Fitzenberger, B. Polarization and Rising Wage Inequality: Comparing the U.S. and Germany. Econometrics 2018, 6, 20.

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