Working Paper: CEPR ID: DP3009
Authors: Patrick A. Puhani
Abstract: 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.
Keywords: Germany; Identification; Rigidities; Unemployment; Wages
JEL Codes: J31; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wage rigidity (J31) | unemployment (J64) |
| rising wage rate (J38) | rising unemployment rate (J64) |
| weak wage rigidity (J31) | increased unemployment likelihood for young workers (F66) |
| lack of wage response to negative demand shocks (J29) | rise in unemployment rates for young workers (F66) |
| average real wages (J31) | unemployment rates (J64) |
| strong wage rigidity dynamics (J31) | rising unemployment rates among low-skilled workers (F66) |