Are Individual Characteristics all that Matters in Earnings Determination? Evidence from the US and Germany

W David McCausland, Fraser Edward Summerfield, Ioannis Theodossiou

Research output: Working paperDiscussion paper

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Abstract

Industry wage differentials may result either from the structure of the industry (demand type) or human capital (supply type) characteristics of the employed labour force. This study uses two major data sets from Germany and the US that allow the investigation of the effects of these demand and supply type factors on average earnings across industries. The main contribution of the paper shows that aggregate demand relevant to the particular industry has a strong positive effect on the industry's average earnings in addition to the previously established results regarding the significance of the effects of worker and firm characteristics. Consequently, labour market policies, which address solely the characteristics of the workforce and their human capital without due consideration of the macroeconomic environment and the structure of the industry, should be expected to produce the disappointing results of an increasing share of low pay employment in the wage distribution.
Original languageEnglish
PublisherUniversity of Aberdeen Business School
Number of pages33
Publication statusPublished - 17 Dec 2015

Publication series

NameDiscussion Paper in Economics
PublisherUniversity of Aberdeen
No.14
Volume15
ISSN (Electronic)0143-4543

Keywords

  • macroeconomic demand
  • industrial earnings
  • vacancies

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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    McCausland, W. D., Summerfield, F. E., & Theodossiou, I. (2015). Are Individual Characteristics all that Matters in Earnings Determination? Evidence from the US and Germany. (Discussion Paper in Economics; Vol. 15, No. 14). University of Aberdeen Business School.