Inter-industry wage differentials in EU countries: what do cross-country time varying data add to the picture?

This paper documents the existence and main patterns of inter-industry wage differentials across a large number of industries for 8 EU countries at two points in time and explores possible explanations for these. The analysis uses the European Structure of Earnings Survey (SES), an internationally harmonised matched employer-employee dataset, to estimate inter-industry wage differentials conditional on a set of employee, employer and job characteristics. After investigating the possibility that unobservable employee characteristics lie behind the conditional wage differentials, a hypothesis which cannot be accepted, the paper investigates the role of institutional, industry structure and performance characteristics in explaining inter-industry wage differentials. The results suggest that inter-industry wage differentials are consistent with rent sharing mechanisms and that rent sharing is more likely in industries with firm-level collective agreements and with higher collective agreement coverage.