Union Decline or Skill-Biased Technological Change? Income Inequality in Germany, 1979-2006
Wage inequality in German has risen markedly since the mid-1990s; nevertheless, research on the causes and consequences of increasing earnings variability remain in their infancy. Cross-nationally, two theories arguably dominate the literature regarding the sources for growing wage inequality: skill-biased technological change (SBTC) and trade union decline. Whereas economists frequently argue in favor of market-based explanations including particularly skill-biased technological change, in the German context, labor market institutions and especially trade unions are commonly assumed to exert significant influence on the pay structure. While SBTC and trade union decline have both likely contributed to rising inequality, previous investigations have been largely unable to adequately assess these theories and their contribution on inequality over time. The goal of this project is therefore to investigate the role of skill-biased technological change in conjunction with trade union decline on the growth in earnings dispersion in Germany in recent decades.