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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

open CV
Research Interests
  • product and input market power
  • firm productivity
  • production costs of firms

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

Matthias Mertens holds a masters' degree in economics and in economic law, both from Martin Luther University Halle-Wittenberg. He optained his PhD from Otto von Guericke University Magdeburg. From January to May 2023 he was a visiting researcher at Harvard University.

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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European Firm Concentration and Aggregate Productivity

Tommaso Bighelli Filippo di Mauro Marc Melitz Matthias Mertens

in: Journal of the European Economic Association, forthcoming

Abstract

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

Matthias Mertens Steffen Müller

in: Journal of Comparative Economics, No. 3, 2022

Abstract

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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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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Working Papers

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Do Larger Firms Have Higher Markups?

Matthias Mertens Bernardo Mottironi

in: IWH Discussion Papers, No. 1, 2023

Abstract

Several models posit a positive cross-sectional correlation between markups and firm size, which, among others, characterizes misallocation, factor shares, and gains from trade. Yet, taking labor market power into account in markup estimation, we show that larger firms have lower markups. This correlation turns positive only after conditioning on wage markdowns, suggesting interactions between product and labor market power. Our findings are robust to common criticism (e.g., price bias) and hold across 19 European countries. We discuss the resulting implications and highlight studying input and output market power within an integrated framework as an important next step for future research.

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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

Abstract

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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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 Green Transition East Germany
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