Structural Change and Productivity
The department of structural change and productivity analyses dynamics of structural change driven, for instance, by globalization or technological progress. Structural change causes prosperity and demise of regions, industries, and firms, and we use microeconometric methods to empirically assess these effects. The department staffs the secretariat of the Competitiveness Research Network (CompNet), which is a hub for research and policy analysis on competitiveness and productivity, and coordinates MICROPROD (EU Horizon 2020).
Our focus is on productivity, innovation, and labour market outcomes such as employment and wages. We devote special attention to the transformation process of the East German regions, initiated by the Fall of the Berlin Wall and the German unification. The Research Clusters "Institutions and Social Norms" and "Productivity and Innovation" build the framework for our research agenda and the corresponding policy advice.
Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory
in: American Economic Journal: Macroeconomics, forthcoming
In this paper, we review the literature on declining business dynamism and its implications in the United States and propose a unifying theory to analyze the symptoms and the potential causes of this decline. We first highlight 10 pronounced stylized facts related to declining business dynamism documented in the literature and discuss some of the existing attempts to explain them. We then describe a theoretical framework of endogenous markups, innovation, and competition that can potentially speak to all of these facts jointly. We next explore some theoretical predictions of this framework, which are shaped by two interacting forces: a composition effect that determines the market concentration and an incentive effect that determines how firms respond to a given concentration in the economy. The results highlight that a decline in knowledge diffusion between frontier and laggard firms could be a significant driver of empirical trends observed in the data. This study emphasizes the potential of growth theory for the analysis of factors behind declining business dynamism and the need for further investigation in this direction.
Entry into Self-employment and Individuals’ Risk-taking Propensities
in: Small Business Economics, forthcoming
Most of the existing empirical literature on self-employment decisions assumes that individuals’ risk-taking propensities are stable over time. We allow for endogeneity on both sides when examining the relationship between individual risk-taking propensities and entry into self-employment. We confirm that a greater risk-taking propensity is associated with a higher probability of entering self-employment. However, we also find evidence that entering self-employment is associated with a significant and substantial increase in an individual’s propensity to take risks. Our findings add to the growing evidence that risk-taking propensities are not only inborn, but also determined by environmental factors.
Who Buffers Income Losses after Job Displacement? The Role of Alternative Income Sources, the Family, and the State
in: LABOUR, forthcoming
Using survey data from the German Socio‐Economic Panel (SOEP), this paper analyses the extent to which alternative income sources, reactions within the household context, and redistribution by the state attenuate earnings losses after job displacement. Applying propensity score matching and fixed effects estimations, we find that income from self‐employment reduces the earnings gap only slightly and severance payments buffer losses in the short run. On the household level, we find little evidence for an added worker effect whereas redistribution by the state within the tax and transfer system mitigates income losses substantially.
Identifying Cooperation for Innovation―a Comparison of Data Sources
in: Industry and Innovation, forthcoming
The value of social network analysis is critically dependent on the comprehensive and reliable identification of actors and their relationships. We compare regional knowledge networks based on different types of data sources, namely, co-patents, co-publications, and publicly subsidized collaborative R&D projects. Moreover, by combining these three data sources, we construct a multilayer network that provides a comprehensive picture of intraregional interactions. By comparing the networks based on the data sources, we address the problems of coverage and selection bias. We observe that using only one data source leads to a severe underestimation of regional knowledge interactions, especially those of private sector firms and independent researchers.
Birds, Birds, Birds: Co-Worker Similarity, Workplace Diversity and Job Switches
in: British Journal of Industrial Relations, forthcomingread publication
Intangible Capital and Productivity. Firm-level Evidence from German Manufacturing
in: IWH Discussion Papers, No. 1, 2020
We study the importance of intangible capital (R&D, software, patents) for the measurement of productivity using firm-level panel data from German manufacturing. We first document a number of facts on the evolution of intangible investment over time, and its distribution across firms. Aggregate intangible investment increased over time. However, the distribution of intangible investment, even more so than that of physical investment, is heavily right-skewed, with many firms investing nothing or little, and a few firms having very large intensities. Intangible investment is also lumpy. Firms that invest more intensively in intangibles (per capita or as sales share) also tend to be more productive. In a second step, we estimate production functions with and without intangible capital using recent control function approaches to account for the simultaneity of input choice and unobserved productivity shocks. We find a positive output elasticity for research and development (R&D) and, to a lesser extent, software and patent investment. Moreover, the production function estimates show substantial heterogeneity in the output elasticities across industries and firms. While intangible capital has small effects for firms with low intangible intensity, there are strong positive effects for high-intensity firms. Finally, including intangibles in a gross output production function reduces productivity dispersion (measured by the 90-10 decile range) on average by 3%, in some industries as much as nearly 9%.
Import Competition and Firm Productivity: Evidence from German Manufacturing
in: IWH Discussion Papers, No. 20, 2019
This study analyses empirically the effects of import competition on firm productivity (TFPQ) using administrative firm-level panel data from German manufacturing. We find that only import competition from high-income countries is associated with positive incentives for firms to invest in productivity improvement, whereas import competition from middle- and low-income countries is not. To rationalise these findings, we further look at the characteristics of imports from the two types of countries and the effects on R&D, employment and sales. We provide evidence that imports from high-income countries are relatively capital-intensive and technologically more sophisticated goods, at which German firms tend to be relatively good. Costly investment in productivity appears feasible reaction to such type of competition and we find no evidence for downscaling. Imports from middle- and low-wage countries are relatively labour-intensive and technologically less sophisticated goods, at which German firms tend to generally be at disadvantage. In this case, there are no incentives to invest in innovation and productivity and firms tend to decline in sales and employment.
Police Reorganization and Crime: Evidence from Police Station Closures
in: German Council of Economic Experts Working Paper, No. 7, 2019
Does the administrative organization of police affect crime? In answering this question, we focus on the reorganization of local police agencies. Specifically, we study the effects police force reallocation via station closures has on local crime. We do this by exploiting a quasi-experiment where a reform substantially reduced the number of police stations. Combining a matching strategy with an event-study design, we find no effects on total theft. Police station closures, however, open up tempting opportunities for criminals in car theft and burglary in residential properties. We can rule out that our effects arise from incapacitation, crime displacement, or changes in employment of local police forces. Our results suggest that criminals are less deterred after police station closures and use the opportunity to steal more costly goods.
Gift-exchange in Society and the Social Integration of Refugees: Evidence from a Field, a Laboratory, and a Survey Experiment
in: IWH Discussion Papers, No. 17, 2019
Refugee integration needs broad support from society, but only a minority is actively engaged. Given that most individuals reciprocate kind behaviour, we examine the idea that the proportion of supporters is increasing as a reciprocal response to refugees’ contributions to society through volunteering. Our nationwide survey experiment shows that the intentions to contribute time and money rise significantly when citizens learn about refugees’ pro-social activities. Importantly, this result holds for individuals who have not been in contact to refugees so far. We complement this investigation by experiments in the lab and the field – which confirm our findings for actual behaviour.
Mission, Motivation, and the Active Decision to Work for a Social Cause
in: IWH Discussion Papers, No. 10, 2019
The mission of a job does not only affect the type of worker attracted to an organisation, but may also provide incentives to an existing workforce. We conducted a natural field experiment with 267 short-time workers and randomly allocated them to either a prosocial or a commercial job. Our data suggest that the mission of a job itself has a performance enhancing motivational impact on particular individuals only, i.e., workers with a prosocial attitude. However, the mission is very important if it has been actively selected. Those workers who have chosen to contribute to a social cause outperform the ones randomly assigned to the same job by about 15 percent. This effect seems to be a universal phenomenon which is not driven by information about the alternative job, the choice itself or a particular subgroup.