Dr Matthias Mertens

Dr Matthias Mertens
Current Position

since 10/19

Head of IWH-CompNet-Team

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

since 10/15

Economist in the Department of 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. He is the coordinator of the scientific team of CompNet and head of the IWH-CompNet-Group since October 2019. 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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Labor Market Power and the Distorting Effects of International Trade

Matthias Mertens

in: International Journal of Industrial Organization, No. 102562, 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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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

This study investigates how labour market power shapes between-firm wage differences using German manufacturing sector data from 1995 to 2016. Over time, firm- and employee-side labour market power, defined as the difference between wages and marginal revenue products of labour (MRPL), increasingly moderated rising between-firm wage inequality. This is because small, low-wage, low-MRPL firms possess no labour market power and pay wages equal to or even above their MRPL, whereas large, high-wage, high-MRPL firms possess high labour market power and pay wages below their MRPL. These wage-MRPL differences grow over time and compress the firm wage distribution compared to the counterfactual competitive labour market scenario. Particularly for the largest, highest-paying, and highest-MRPL firms, wage-MRPL differences strongly increase over time. This allows these firms to generate increasingly large labour market rents while being active on competitive product markets, providing novel insights on why such “superstar firms” are profitable and successful.

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Import Competition and Firm Productivity: Evidence from German Manufacturing

Richard Bräuer Matthias Mertens Viktor Slavtchev

in: IWH Discussion Papers, No. 20, 2019

Abstract

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.

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