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Wage dispersion, trade unions, and heterogeneous labor demand [Elektronische Ressource] : microeconometric analyses for Germany / Karsten Kohn

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Johann Wolfgang Goethe-UniversitätFrankfurt am MainWage Dispersion, Trade Unions, andHeterogeneous Labor Demand –Microeconometric Analyses for GermanyInaugural-Dissertation zur Erlangung des Doktorgradesdes Fachbereichs Wirtschaftswissenschaftender Johann Wolfgang Goethe-Universität Frankfurt am Mainvorgelegt vonDipl.-Volkswirt Karsten Kohnaus Itzehoeim November 2006Erstgutachter: Prof. Bernd Fitzenberger, Ph.D.Zweitgutachter: Prof. Dr. Reinhard HujerTag der Promotion: 14.02.2007To My ParentsAcknowledgementsThis dissertation is the result of an inspiring time at the Department of Economics and BusinessAdministration at Goethe University Frankfurt and at the Department of Economics at theUniversity of Mannheim. The thesis could not have been completed without the support frommy advisors, colleagues, friends, and family.First and foremost, I am deeply indebted to my supervisor, Bernd Fitzenberger, for his encourag-ing support, his guidance, and countless invaluable suggestions. My work benefited tremendouslyfrom his advice. Many thanks also go to my second supervisor, Reinhard Hujer.Parts of the dissertation emanate from the research project “Collective Bargaining and the Distri-bution of Wages: Theory and Empirical Evidence” within the DFG research network “Flexibilityin Heterogeneous Labor Markets”. I thank the members of the network, and especially MichaelBurda and Thorsten Vogel from Humboldt University Berlin, for fruitful discussions.

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Johann Wolfgang Goethe-Universität
Frankfurt am Main
Wage Dispersion, Trade Unions, and
Heterogeneous Labor Demand –
Microeconometric Analyses for Germany
Inaugural-Dissertation zur Erlangung des Doktorgrades
des Fachbereichs Wirtschaftswissenschaften
der Johann Wolfgang Goethe-Universität Frankfurt am Main
vorgelegt von
Dipl.-Volkswirt Karsten Kohn
aus Itzehoe
im November 2006Erstgutachter: Prof. Bernd Fitzenberger, Ph.D.
Zweitgutachter: Prof. Dr. Reinhard Hujer
Tag der Promotion: 14.02.2007To My ParentsAcknowledgements
This dissertation is the result of an inspiring time at the Department of Economics and Business
Administration at Goethe University Frankfurt and at the Department of Economics at the
University of Mannheim. The thesis could not have been completed without the support from
my advisors, colleagues, friends, and family.
First and foremost, I am deeply indebted to my supervisor, Bernd Fitzenberger, for his encourag-
ing support, his guidance, and countless invaluable suggestions. My work benefited tremendously
from his advice. Many thanks also go to my second supervisor, Reinhard Hujer.
Parts of the dissertation emanate from the research project “Collective Bargaining and the Distri-
bution of Wages: Theory and Empirical Evidence” within the DFG research network “Flexibility
in Heterogeneous Labor Markets”. I thank the members of the network, and especially Michael
Burda and Thorsten Vogel from Humboldt University Berlin, for fruitful discussions.
I am grateful to my colleagues Annette Bergemann, Martin Biewen, Keith Küster, Aderonke
Osikominu, Stefan Speckesser, Robert Völter, Marie Waller, and Gaby Wunderlich at Goethe
University Frankfurt and at the University of Mannheim, as well as to Nils Happich from the
University of Kiel and Melanie Arntz, Julia Häring, Tobias Hagen, Anja Kuckulenz, Friedhelm
Pfeiffer, Alexandra Spitz-Oener, Susanne Steffes, and Ralf Wilke from the Centre for European
Economic Research (ZEW) at Mannheim for a most cordial environment and many stimulating
discussions. In particular, I sincerely appreciate the motivating exchange with my co-authors
Alfred Garloff, Alexander Lembcke, and Qingwei Wang.
Finally, IwouldliketothankmyfamilyandmypartnerLaurafortheirlovingsupportthroughout
my years of education, their dedication, and their understanding during the time I worked on
the dissertation. I cannot quite articulate how much I owe to all of them.
vviAbstract
The dissertation consists of four self-contained essays. The first paper provides a detailed de-
scription of the evolution of wage inequality in East and West Germany in the late years of the
twentieth century. In contrast to previous decades, wage inequality has been rising in several
dimensions during that period. The second paper identifies cohort effects in the evolution of both
wages and employment. Observed structures are consistent with a labor demand framework that
incorporates steady skill-biased technical change. Substitutability between skill and age groups
in the German labor market is found to be relatively high. Simulations based on estimated
elasticities of substitution illustrate that higher wage dispersion between skill groups would have
contributed to a reduction in unemployment. The third paper estimates determinants of indi-
vidual union membership decisions and studies the erosion of union density in East and West
Germany. Using corresponding predictions of net union density, the fourth paper analyzes the
link between union strength and the structure of wages. A higher union density is associated
with lower residual wage dispersion, reduced skill wage differentials, and a lower wage level. This
finding is in line with an insurance motive for union action.
viiviiiList of Papers
The thesis comprises the following articles:
(1) “Rising Wage Dispersion, After All! The German Wage Structure at the Turn of the
Century,” IZA Discussion Paper 2098, April 2006.
(2) “Skill Wage Premia, Employment, and Cohort Effects: Are Workers in Germany All of the
Same Type?”, IZA Discussion Paper 2185, June 2006, joint with Bernd Fitzenberger.
(3) “The Erosion of Union Membership in Germany: Determinants, Densities, Decomposi-
tions,” IZA Discussion Paper 2193, July 2006, joint with Bernd Fitzenberger and Qingwei
Wang.
(4) “Equal Pay for Equal Work? On Union Power and the Structure of Wages in West Ger-
many, 1985–1997,” translation of “Gleicher Lohn für gleiche Arbeit? Zum Zusammenhang
zwischen Gewerkschaftsmitgliedschaft und Lohnstruktur in Westdeutschland 1985–1997,”
Zeitschrift für ArbeitsmarktForschung, 38 (2/3), 125-146, joint with Bernd Fitzenberger,
2005.
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