Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/308306 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 17447
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Labor market tightness tremendously increased in Germany between 2012 and 2022. We analyze the effect of tightness on wages by combining social security data with unusually rich information on vacancies and job seekers. Instrumental variable regressions reveal positive elasticities between 0.004 and 0.011, implying that higher tightness explains between 7 and 19 percent of the real wage increase. We report greater elasticities for new hires, high-skilled workers, the Eastern German labor market, and the service sector. In particular, tightness raised wages at the bottom of the wage distribution, contributing to the decline in wage inequality over the last decade.
Subjects: 
labor market tightness
wages
labor shortage
occupations
wage inequality
JEL: 
J31
J63
J64
Document Type: 
Working Paper

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