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INTER-INDUSTRY WAGE DIFFERENTIALS IN EU COUNTRIES: WHAT DO CROSS-COUNTRY TIME VARYING DATA ADD TO THE PICTURE?

Philip Du Caju

National Bank of Belgium

Gábor Kátay

Magyar Nemzeti Bank

Ana Lamo

European Central Bank

Daphne Nicolitsas

Bank of Greece

Steven Poelhekke

De Nederlandsche Bank

ABSTRACT

This paper documents the existence and main patterns of inter-industry wage differentials across a large number of industries for 8 EU countries at two points in time and explores possible explanations for these. The analysis uses the European Structure of Earnings Survey (SES), an internationally harmonised matched employer-employee dataset, to estimate inter-industry wage differentials conditional on a set of employee, employer and job characteristics. After investigating the possibility that unobservable employee characteristics lie behind the conditional wage differentials, a hypothesis which cannot be accepted, the paper investigates the role of institutional, industry structure and performance characteristics in explaining inter-industry wage differentials. The results suggest that inter-industry wage differentials are consistent with rent sharing mechanisms and that rent sharing is more likely in industries with firm-level collective agreements and with higher collective agreement coverage.


Keywords
: inter-industry wage differentials, rent sharing, unobserved ability

JEL codes: J31, J41, J51


Acknowledgments
: This paper is part of the research programme conducted in the context of the Wage Dynamics Network (WDN). We are grateful to our WDN colleagues for their comments and support, and WDN Conference participants (June 2008) for constructive suggestions. The support of F. Smets and our ECB colleagues in DG-Statistics were essential in gaining access to 5 of the SES datasets used. We are also grateful to R.Christopoulou, for excellent research assistance, to A. McCallum and L. Wintr for help with the data in the initial stages of this project. We would like to thank Eurostat and the National Statistical Institutes of each of the countries studied for granting access to the SES data and assisting with clarifications. Poelhekke is member of OxCarre and CESifo. Opinions expressed in this article do not necessarily reflect the views of the central banks the authors are affiliated with. Responsibility for errors and omissions remains with the authors.


Correspondence:

Daphne Nicolitsas

Economic Research Department

Bank of Greece, 21, El. Venizelou St.,

10250 Athens, Greece, Tel. +30210-3203603,

Email: dnikolitsa@bankofgreece.gr

 


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