Structural Change and Productivity

The department of structural change and productivity analyses dynamics of structural change driven, for instance, by decarbonization 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 coordinates the Competitiveness Research Network (CompNet), which is a hub for research and policy analysis on competitiveness and productivity.

Our focus is on productivity, business dynamism, and labour market outcomes such as employment and wages. We devote special attention to the role of market power on product and labour markets. Together with the winner of the Max Planck-Humboldt Research Award of 2019, Professor Ufuk Akcigit (Chicago), the department investigates the causes of the economic differences between East and West Germany. The Research Clusters "Institutions and Social Norms" and "Productivity and Innovation" build the framework for our research agenda and the corresponding policy advice.

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Professor Dr Steffen Müller
Professor Dr Steffen Müller
Leiter - Department Structural Change and Productivity
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Refereed Publications


European Firm Concentration and Aggregate Productivity

Tommaso Bighelli Filippo di Mauro Marc Melitz Matthias Mertens

in: Journal of the European Economic Association, forthcoming


This paper derives a European Herfindahl–Hirschman concentration index from 15 micro-aggregated country datasets. In the last decade, European concentration rose due to a reallocation of economic activity toward large and concentrated industries. Over the same period, productivity gains from an increasing allocative efficiency of the European market accounted for 50% of European productivity growth while markups stayed constant. Using country-industry variation, we show that changes in concentration are positively associated with changes in productivity and allocative efficiency. This holds across most sectors and countries and supports the notion that rising concentration in Europe reflects a more efficient market environment rather than weak competition and rising market power.

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Innovation Cooperation in East and West Germany: A Study on the Regional and Technological Impact

Uwe Cantner Alexander Giebler Jutta Günther Maria Kristalova Andreas Meder

in: International Journal of Computational Economics and Econometrics, forthcoming


In this paper, we investigate the impact of regional and technological innovation systems on innovation cooperation. We develop an indicator applicable to regions, which demonstrates the relative regional impact on innovation cooperation. Applying this method to German patent data, we find that regional differences in the degree of innovation cooperation do not only depend on the technology structure of a region but also on specific regional effects. High-tech oriented regions, whether east or west, are not automatically highly cooperative regions. East German regions have experienced a dynamic development of innovation cooperation since re-unification in 1990. Their cooperation intensity remains higher than in West German regions.

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Exposure to Conflict, Migrations and Long-run Education and Income Inequality: Evidence from Bosnia and Herzegovina

Adnan Efendic Dejan Kovač Jacob N. Shapiro

in: Defence and Peace Economics, forthcoming


We investigate the long-term relationship between conflict-related migration and individual socioeconomic inequality. Looking at the post-conflict environment of Bosnia and Herzegovina (BiH), a former Yugoslav state most heavily impacted by the wars of the early 1990s, the paper focuses on differences in educational performance and income between four groups: migrants, internally displaced persons, former external migrants, and those who did not move. The analysis leverages a municipality-representative survey (n ≈ 6,000) that captured self-reported education and income outcomes as well as migration histories. We find that individuals with greater exposure to conflict had systematically worse educational performance and lower earnings two decades after the war. Former external migrants now living in BiH have better educational and economic outcomes than those who did not migrate, but these advantages are smaller for external migrants who were forced to move. We recommend that policies intended to address migration-related discrepancies should be targeted on the basis of individual and family experiences caused by conflict.

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Uncovered Workers in Plants Covered by Collective Bargaining: Who Are They and How Do They Fare?

Boris Hirsch Philipp Lentge Claus Schnabel

in: British Journal of Industrial Relations, forthcoming


Abstract In Germany, employers used to pay union members and non-members in a plant the same union wage in order to prevent workers from joining unions. Using recent administrative data, we investigate which workers in firms covered by collective bargaining agreements still individually benefit from these union agreements, which workers are not covered anymore and what this means for their wages. We show that about 9 per cent of workers in plants with collective agreements do not enjoy individual coverage (and thus the union wage) anymore. Econometric analyses with unconditional quantile regressions and firm-fixed-effects estimations demonstrate that not being individually covered by a collective agreement has serious wage implications for most workers. Low-wage non-union workers and those at low hierarchy levels particularly suffer since employers abstain from extending union wages to them in order to pay lower wages. This jeopardizes unions' goal of protecting all disadvantaged workers.

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The East-West German Gap in Revenue Productivity: Just a Tale of Output Prices?

Matthias Mertens Steffen Müller

in: Journal of Comparative Economics, forthcoming


East German manufacturers’ revenue productivity is substantially below West German levels, even three decades after German unification. Using firm-product-level data with product quantities and prices, we analyze the role of product specialization and show that the prominent “extended work bench hypothesis” cannot explain these sustained productivity differences. Eastern firms specialize in simpler product varieties generating less consumer value and being manufactured with less or cheaper inputs. Yet, such specialization cannot explain the productivity gap because Eastern firms are physically less productive for given product prices. Hence, there is a genuine price-adjusted physical productivity disadvantage of Eastern compared to Western firms.

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Working Papers


Automation with Heterogeneous Agents: The Effect on Consumption Inequality

Tommaso Santini

in: IWH Discussion Papers, No. 28, 2022


In this paper, I study technological change as a candidate for the observed increase in consumption inequality in the United States. I build an incomplete market model with educational choice combined with a task-based model on the production side. I consider two channels through which technology affects inequality: the skill that an agent can supply in the labor market and the level of capital she owns. In a quantitative analysis, I show that (i) the model replicates the increase in consumption inequality between 1981 and 2008 in the US (ii) educational choice and the return to wealth are quantitatively important in explaining the increase in consumption inequality.

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Where to Go? High-skilled Individuals’ Regional Preferences

Sabrina Jeworrek Matthias Brachert

in: IWH Discussion Papers, No. 27, 2022


We conduct a discrete choice experiment to investigate how the location of a firm in a rural or urban region affects job attractiveness and contributes to the spatial sorting of university students and graduates. We characterize the attractiveness of a location based on several dimensions (social life, public infrastructure, connectivity) and combine this information with an urban or rural attribution. We also vary job design as well as contractual characteristics of the job. We find that job offers from companies in rural areas are generally considered less attractive. This is true regardless of the attractiveness of the region. The negative perception is particularly pronounced among persons with urban origin and singles. These persons rate job offers from rural regions significantly worse. In contrast, high-skilled individuals who originate from rural areas as well as individuals with partners and kids have no specific preference for jobs in urban or rural areas.

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Organised Labour, Labour Market Imperfections, and Employer Wage Premia

Sabien Dobbelaere Boris Hirsch Steffen Müller Georg Neuschäffer

in: IWH Discussion Papers, No. 20, 2022


This paper examines how collective bargaining through unions and workplace codetermination through works councils shape labour market imperfections and how labour market imperfections matter for employer wage premia. Based on representative German plant data for the years 1999–2016, we document that employer monopsony involving below competitive wages is far more prevalent than the contrary worker monopoly. We further find a smaller prevalence and intensity of employer monopsony when unions or works councils are present and the opposite for worker monopoly. Finally, we document a close link between labour market imperfections and employer wage premia. The presence and intensity of employer monopsony are associated with a lower level and larger dispersion of premia, whereas more intense worker monopoly is accompanied by a higher level only.

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Identifying Rent-sharing Using Firms‘ Energy Input Mix

Matthias Mertens Steffen Müller Georg Neuschäffer

in: IWH Discussion Papers, No. 19, 2022


We present causal evidence on the rent-sharing elasticity of German manufacturing firms. We develop a new firm-level Bartik instrument for firm rents that combines the firms‘ predetermined energy input mix with national energy carrier price changes. Reduced-form evidence shows that higher energy prices depress wages. Instrumental variable estimation yields a rent-sharing elasticity of approximately 0.20. Rent-sharing induced by energy price variation is asymmetric and driven by energy price increases, implying that workers do not benefit from energy price reductions but are harmed by price increases. The rent-sharing elasticity is substantially larger in small (0.26) than in large (0.17) firms.

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The Value of Firm Networks: A Natural Experiment on Board Connections

Ester Faia Maximilian Mayer Vincenzo Pezone

in: SSRN Working Papers, No. 269, 2022


We present causal evidence on the effect of boardroom networks on firm value and compensation policies. We exploit a ban on interlocking directorates of Italian financial and insurance companies as exogenous variation and show that firms that lose centrality in the network experience negative abnormal returns around the announcement date. The key driver of our results is the role of boardroom connections in reducing asymmetric information. The complementarities with the input-output and cross-ownership networks are consistent with this channel. Using hand-collected data, we also show that network centrality has a positive effect on directors’ compensation, providing evidence of rent sharing.

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