SKILLS AND WAGE INEQUALITY IN GREECE:
EVIDENCE FROM MATCHED EMPLOYER-EMPLOYEE DATA, 1995-2002
Bank of Greece
This paper examines changes in the Greek wage distribution over 1995-2002 and the role of skills in these changes using a matched employer-employee data set. This data set enables us to account for firm heterogeneity and obtain a more refined picture of the impact of skills. The methodology adopted is the Machado-Mata decomposition technique, which separates the part of wage changes that is due to changes in the job/employer and employee characteristics from the part due to changes in the returns to these characteristics. Our results indicate that the role of skills has been decisive. The skill return effects in combination with the composition effects of tenure, which are arguably responsive to economic developments and market conditions, have had an important contribution to the changes in the Greek wage distribution. On the other hand, the impact of predetermined demographic changes, as those captured by the age and education composition effects, has been relatively milder.
JEL classification: J31
Keywords: Returns to skill, Wage inequality, Quantile regression
Acknowledgments: The work was conducted within the framework of the Eurosystem Wage Dynamics Network (WDN). We thank for their helpful comments Heather Gibson, Stephen Hall, Juan F. Jimeno, Ana Lamo, Theodoros Mitrakos, Vassilis Monastiriotis, Lia Papapetrou, Frank Smets, the participants of the WDN meetings and an anonymous referee of the ECB Working Paper Series. Finally, we would like to thank the National Statistical Service of Greece for providing access to the Structure of Earning Survey data to the Bank of Greece. Rebekka Christopoulou acknowledges financial support from the Greek Ministry of Economy and Finance. The views expressed in the paper are of the authors and do not necessarily reflect those of the Bank of Greece or the European Central Bank.
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