Unified but Unequal

Christian Dustmann, Johannes Ludsteck, and Uta Schoenberg have a new paper out in the Quarterly Journal of Economics, dismissing the notion that Germany has stayed pretty equal over recent decades. Here’s their abstract and the key picture:

Revisiting the German Wage Structure (gated published version, ungated working paper)
This paper shows that wage inequality in West Germany has increased over the past three decades, contrary to common perceptions. During the 1980s, the increase was concentrated at the top of the distribution; in the 1990s, it occurred at the bottom end as well. Our findings are consistent with the view that both in Germany and in the United States, technological change is responsible for the widening of the wage distribution at the top. At the bottom of the wage distribution, the increase in inequality is better explained by episodic events, such as supply shocks and changes in labor market institutions. These events happened a decade later in Germany than in the United States.

Here are the trends for West Germany: