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Germany’s economy is so bad even sausage factories are closingIWHThe Economist, January 15, 2026
Fitting duration models on an inflow sample of jobs in Germany starting in 2002 to 2010, the author investigates the impact of employers’ use of temporary agency work on regular workers’ job stability. In line with dual labor market theory, the author finds that nontemporary jobs are significantly more stable when employers use temporary agency workers. The rise in job stability stems mainly from reduced transitions into nonemployment, suggesting that nontemporary workers are safeguarded against involuntary job losses. The findings are robust to controlling for unobserved permanent employer characteristics and changes in the observational window that comprises the labor market disruption of the Great Recession.
This paper looks at the surprisingly different labor market performance of the United States, Canada, Germany, and several other OECD countries during and after the Great Recession of 2008–9. A first important finding is that the large employment swings in the construction sector linked to the boom and bust in US housing markets is an important factor behind the different labor market performances of the three countries. We also find that cross-country differences among OECD countries are consistent with a conventional Okun relationship linking gross domestic product growth to employment performance.
The focus of this paper is on the steady state of a two-sector economy with undirected search where employed and unemployed workers can search for jobs, both within a sector and between the sectors. As in the one-sector model, on-the-job search generates wage dispersion among homogeneous workers. The analysis of the two-sector model uncovers a property called constant tension that is responsible for analytical tractability. We characterize the steady state in all cases with constant tension. When time discounting vanishes, constant tension yields the endogenous separation rate in each sector as a linear function of the present value for a worker. The one-sector economy automatically satisfies constant tension, in which case the linear separation rate implies that equilibrium offers of the worker value are uniformly distributed. Constant tension also has strong predictions for worker transitions and value/wage dispersion, both within a sector and between the two sectors. When constant tension does not hold, we compute the steady state numerically and illustrate its properties.
In this paper we analyse if specific R&D cooperation partners are related to an increase in the probability of innovation failures in terms discontinuing innovation projects. We distinguish between seven different R&D cooperation partner types, and we discriminate between product innovation failures and process innovation failures. Using German Community Innovation Survey data we find that, firstly, each type of R&D cooperation partner has a different effect on innovation failures. Secondly, we show that product innovation failures and process innovation failures are not affected in equal measure by the same type of R&D cooperation partner. Our results suggest that while R&D cooperation with public research institutes is significantly and negatively related to the probability to cancel a process innovation project, the coefficient is positive but insignificant for product innovation failures. Firms conducting partnerships with suppliers, however, run the risk of both product and process innovation failures. In turn, cooperation with competitors is positively correlated only to process innovation failures.
Using a 50 % sample of all private sector establishments in Germany, we report that spinoffs are larger, initially employ more skilled and more experienced workers, and pay higher wages than other startups. We investigate whether spinoffs are more likely to survive than other startups, and whether spinoff survival depends on the quality and size of their parent companies, as suggested in some of the theoretical and empirical literature. Our estimated survival models confirm that spinoffs are generally less likely to exit than other startups. We also distinguish between pulled spinoffs, where the parent company continues after they are founded, and pushed spinoffs, where the parent company stops operations. Our results indicate that in western and eastern Germany and in all sectors investigated, pulled spinoffs have a higher probability of survival than pushed spinoffs. Concerning the parent connection, we find that intra-industry spinoffs and spinoffs emerging from better-performing or smaller parent companies are generally less likely to exit.
In Germany, dependent employees take almost 30 days of paid vacation annually. We enquire whether an individual’s trade union membership affects the duration of vacation. Using data from the German Socio-Economic Panel (SOEP) for the period 1985 to 2010 and employing pooled OLS-estimators, we find that being a union member goes along with almost one additional day of vacation per year. Estimations exploiting the panel structure of our data suggest that a smaller part of this vacation differential can be due to the union membership status, while self-selection effects play a more important role.
Using linked employer–employee panel data for Germany, we investigate whether firms implement real wage reductions in a selective manner. In line with insider–outsider and several strands of efficiency wage theory, we find strong evidence for selective wage cuts with high-productivity workers being spared even when controlling for permanent differences in firms' wage policies. In contrast to some recent contributions stressing fairness considerations, we also find that wage cuts increase wage dispersion among peers rather than narrowing it. Notably, the same selectivity pattern shows up when restricting our analysis to firms covered by collective agreements or having a works council.
We show that the major part of the plant size–wage premium in Germany is reflected in different wage growth patterns in plants of different size. This is consistent with the hypothesis that large firms ‘produce’ more skilled workers over time.
Technological complementarity is argued to be a crucial element for effective R&D collaboration. The real structure is, however, still largely unknown. Based on the argument that organizations’ knowledge resources must fit for enabling collective learning and innovation, we use the co-occurrence of firms in collaborative R&D projects in Germany to assess inter-sectoral technological complementarity between 129 sectors. The results are mapped as complementarity space for the Germany economy. The space and its dynamics from 1990 to 2011 are analyzed by means of social network analysis. The results illustrate sectors being complements both from a dyadic and portfolio/network perspective. This latter is important, as complementarities may only become fully effective when integrated in a complete set of different knowledge resources from multiple sectors. The dynamic perspective moreover reveals the shifting demand for knowledge resources among sectors at different time periods.
Economists and business managers have long been interested in the impact of research and development (R&D) cooperation with scientific institutions on the innovation performance of firms. Recent research identifies a positive correlation between these two variables. This paper aims to contribute to the identification of the relationship between R&D cooperation with scientific institutions and the product and process innovation performance of firms by using a difference-in-difference approach. In doing so, we distinguish between two different types of scientific institutions: universities and governmental research institutes. For the econometric analyses, we use data from the German Community Innovation Survey. In total, data from up to 560 German service and manufacturing firms are available for the difference-in-difference analyses. The results suggest that R&D cooperation with universities and governmental research institutes has a positive effect on both product innovation and process innovation performance of firms.
