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Dr Matthias Mertens

Dr Matthias Mertens
Current Position

since 2/21

Head of the Research Group Innovation, Productivity, and Economic Dynamics

Halle Institute for Economic Research (IWH) – Member of the Leibniz Association

since 10/19

Head of IWH-CompNet-Team

Halle Institute for Economic Research (IWH) – Member of the Leibniz Association

since 10/15

Member of the Department Structural Change and Productivity

Halle Institute for Economic Research (IWH) – Member of the Leibniz Association

Research Interests
  • firm productivity
  • product and input market power
  • allocation of production factors

Matthias Mertens joined the Department of Structural Change and Productivity in October 2015. His research focuses on firm productivity, product and input market power, and factor allocation.

Matthias Mertens received his bachelor's and master's degree from Martin Luther University Halle-Wittenberg and his PhD from Otto von Guericke University Magdeburg.

Your contact

Dr Matthias Mertens
Dr Matthias Mertens
Mitglied - Department Structural Change and Productivity
Send Message +49 345 7753-707 Personal page

Publications

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Micro-mechanisms behind Declining Labor Shares: Rising Market Power and Changing Modes of Production

Matthias Mertens

in: International Journal of Industrial Organization, March 2022

Abstract

I derive a micro-founded framework showing how rising firm market power on product and labor markets and falling aggregate labor output elasticities provide three competing explanations for falling labor shares. I apply my framework to 20 years of German manufacturing sector micro data containing firm-specific price information to study these three distinct drivers of declining labor shares. I document a severe increase in firms’ labor market power, whereas firms’ product market power stayed comparably low. Changes in firm market power and a falling aggregate labor output elasticity each account for one half of the decline in labor's share.

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Labor Market Power and the Distorting Effects of International Trade

Matthias Mertens

in: International Journal of Industrial Organization, January 2020

Abstract

This article examines how final product trade with China shapes and interacts with labor market imperfections that create market power in labor markets and prevent an efficient market outcome. I develop a framework for measuring such labor market power distortions in monetary terms and document large degrees of these distortions in Germany's manufacturing sector. Import competition only exerts labor market disciplining effects if firms, rather than employees, possess labor market power. Otherwise, increasing export demand and import competition both fortify existing distortions, which decreases labor market efficiency. This widens the gap between potential and realized output and thus diminishes classical gains from trade.

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Working Papers

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European Firm Concentration and Aggregate Productivity

Tommaso Bighelli Filippo di Mauro Marc Melitz Matthias Mertens

in: IWH Discussion Papers, No. 5, 2021

Abstract

This article 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 towards large and concentrated industries. Over the same period, productivity gains from reallocation accounted for 50% of European productivity growth and 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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The East-West German Gap in Revenue Productivity: Just a Tale of Output Prices?

Matthias Mertens Steffen Müller

in: IWH Discussion Papers, No. 14, 2020

Abstract

East German manufacturers’ revenue productivity (value-added per worker) is some 8 (25) percent below West German levels, even three decades after German unification. Using firm-product-level data containing information on product quantities and prices, we analyse the role of product specialisation and reject the prominent ‚extended work bench hypothesis‘, stating a specialisation of Eastern firms in the intermediate input production as explanation for these sustained productivity differences. We decompose the East’s revenue productivity disadvantage into Eastern firms selling at lower prices and producing more physical output for given amounts of inputs within ten-digit product industries. This suggests that Eastern firms specialise vertically in simpler product varieties generating less consumer value but being manufactured with less or cheaper inputs. Vertical specialisation, however, does not explain the productivity gap as Eastern firms are physically less productive for given product prices, implying a genuine physical productivity disadvantage of Eastern compared to Western firms.

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Labour Market Power and Between-Firm Wage (In)Equality

Matthias Mertens

in: IWH Discussion Papers, No. 13, 2020

Abstract

I study how labour market power affects firm wage differences using German manufacturing sector firm-level data (1995-2016). In past decades, labour market power increasingly moderated rising between-firm wage inequality. This is because high-paying firms possess high and increasing labour market power and pay wages below competitive levels, whereas low-wage firms pay competitive wages. Over time, large, high-wage, high-productivity firms generate increasingly large labour market rents while selling on competitive product markets. This provides novel insights on why such “superstar firms” are profitable and successful. Using micro-aggregated data covering most economic sectors, I validate my results for ten other European countries.

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Keywords

Labour Market Productivity
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