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Keynes Fund

 

Project Summary

Dr. Jake Bradley - Search, Sorting and Heterogeneity: A Structural Decomposition of Wage Inequality in Germany (JHLV).

The project’s aims were to contribute to a better understanding of the recent rises in inequality of employment opportunity and in particular wage inequality. We documented trends in the level and dispersion of wages as well as the increase in the unemployment rate in Germany. We developed a structural model of wage and employment determination aimed at fitting detailed administrative data on Germany. We used our model to estimate the impacts of the Hartz reforms - a series of labour market reforms implemented at the start of the century. The Hartz reforms are often attributed to the ‘employment miracle’ – the large expansion in employment. Our results indicate that while the reforms did have a modest impact on employment, the reforms were responsible for a substantial fall in wages, particularly hard felt for low wage and low skilled workers.

Project Activities and Outputs

The paper has had a great deal of exposure particularly amongst German public policy institutions. In addition to presentations at the University of Cambridge we have presented at:

  • University College London;
  • the University of Bristol;
  • the London School of Economics;
  • the Royal Economic Society meeting at the University of Manchester;
  • Galatasaray University, Istanbul;
  • the University of Amsterdam;
  • University of Mannheim;
  • the SAEe in Bilbao;
  • the RES PhD meeting at the University of Westminster;
  • the IZA Institute of Labor Economics, Bonn;
  • Uppsala University; the University of Birmingham;
  • Aarhus University;
  • the University of Nottingham

Future Plans

The paper has been published in the European Economic Review. We feel we have gained a much greater understanding of the causes and consequences of differences in wage and employment and how public policy impacts on both. In future work we would like to apply the methodology we have built to examine other large scale and multifaceted labour market policy programmes.