The Changing Wage Distribution in Germany between 1985 and 2006

Abstract

In this paper the changes in the wage distribution in (West-)Germany between 1985 and 2006 are analysed. The theoretical framework is based on the literature on skill-biased technological change (SBTC) and on structural theory. Analyses draw on descriptive measures of the development of wage inequality among blue- and white-collar workers as well as on regression analyses of individual and structural determinants of wages for the years 1985 to 2006. The results show that wage inequality remained fairly constant until the early 1990s, but started to increase from the mid-1990s onwards. Moreover, regression analyses reveal that this increase was paralleled by rising inter-class wage differentials, while returns to (higher) education decreased.