DP3009 | Wage Rigidities in Western Germany: Microeconometric Evidence from the 1990s


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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.