The effect of fragmentation on skill and industry wage premiums: Evidence from the European Union

This paper hypotheses that diverging trends for skill premium might arise from fragmentation in countries at various stages of economic development. Then, individual wage data are brought directly to capture the evolution of high-skilled and low-skilled wages across industries in two EU countries that represent the "two faces" of fragmentation: an old-EU country (Germany) and a transition new- EU country (Slovenia). Results obtained provide evidence about the magnitude of potential losses suffered by low-skilled workers in high- skill-intensive industries in Germany. Otherwise, the relative wage of low-skilled workers in relation to high- skilled workers has increased with fragmentation in Slovenia. Furthermore, the consequences of increasing fragmentation are also reflected on industry wage premiums, as this paper shows that fragmentation reduces the wage premium in low-skill-intensive industries in Germany and Slovenia.