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Workplace heterogeneity and wage inequality in Denmark

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  • Annaïg Morin

Abstract

Wage inequality is on the rise in most developed economies, and this phenomenon has fostered a growing body of research on its potential drivers. Using German data over the period 1985–2009, Card et al. (The Quarterly Journal of Economics 2013, 128(3), 967‐1015) argue that rising workplace heterogeneity has contributed substantially to the rise in wage inequality. I revisit their findings in two ways. First, because the generalization of their findings remains an open question, I apply their methodological approach to Danish register data and test whether rising workplace heterogeneity explains a significant share of the rise in wage inequality in Denmark. I find that, contrary to Germany, workplace heterogeneity remained practically stable over time, and this pattern contributed slightly negatively to the rise in wage inequality. Second, I complement Card et al.'s (2013) methods with the variance decomposition exercise proposed by Song et al. (2019) to identify more precisely the sources of the rise in wage inequality in Denmark. Although the rise in wage inequality is partly a between‐establishment phenomenon, I show that the strengthening of assortative matching patterns and the rising heterogeneity of workers within establishments are the main drivers of growing inequality.

Suggested Citation

  • Annaïg Morin, 2023. "Workplace heterogeneity and wage inequality in Denmark," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(1), pages 123-133, January.
    • Handle: RePEc:wly:japmet:v:38:y:2023:i:1:p:123-133
    DOI: 10.1002/jae.2941
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    References listed on IDEAS

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    1. Braunschweig, Luisa & Dauth, Wolfgang & Roth, Duncan, 2024. "Job Mobility and Assortative Matching," IAB-Discussion Paper 202411, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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