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January 18, 2012

Cluster-Seminar Public Finances and Living Conditions

The Dynamics of Earnings in Germany: Evidence from Social Security Records

Date

January 18, 2012
12:30-13:30

Location

Eleanor-Dulles-Raum
DIW Berlin im Quartier 110
Room 5.2.010
Mohrenstraße 58
10117 Berlin

Speaker

Holger Lüthen
We examine patterns of earnings volatility for male employees who are subject to statutory social security contributions in West Germany over the period 1986 - 2005. For this purpose, we analyse individual records covering highly reliable earnings biographies provided by the German Social Security Administration. We decompose earnings into permanent and transitory components and estimate parameters of the underlying variance-covariance structure of the earnings components model. This provides insights into the mechanics of earnings dynamics of the German labour market. We find evidence for increasing overall volatility which is predominantly driven by the permanent earnings component and therefore indicates increasing earnings inequality.

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