Firm Dynamics and Employment Outcomes

In a market economy, firm foundations and closures are important drivers of resource (re)allocation, structural change, and economic development which is particularly important with respect to the economic transformation of East Germany from a state-directed to a market economy. At the same time, job displacement coming along with structural change may have serious consequences for affected employees, such as unemployment, earnings losses, or lower job quality in a new job. This research group uses microeconometric methods to analyze foundation, evolution, and failure of firms, the amount and quality of jobs created by new firms and the consequences of firm closures for employees, in particular in terms of labor market outcomes such as employment and wages.

Research Cluster
Productivity and Innovation

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Dr Daniel Fackler
Dr Daniel Fackler
Mitglied - Department Structural Change and Productivity
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EXTERNAL FUNDING

01.2020 ‐ 12.2023

The Rise of Populist Parties in Europe: The Dark Side of Globalization and Technological Change?

VolkswagenStiftung

The ultimate goal of the project is to assess whether economic hardship, caused by forces hitting open economies - typically viewed as being beyond the control of individual voters and national authorities - can explain the recent success of populist and nationalist movements in the EU.

Professor Dr Steffen Müller

01.2019 ‐ 12.2021

MICROPROD („Raising EU Productivity: Lessons from Improved Micro Data“)

European Commission

The goal of MICROPROD is to contribute to a greater understanding of the challenges brought about in Europe by the fourth industrial revolution and the associated ‘productivity puzzle’ in a context of globalisation and digitisation, and to provide alternative policy options to better address these challenges.

IWH project page

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 764810.

Professor Dr Steffen Müller

07.2018 ‐ 12.2020

Firm Wage Differentials in Imperfect Labour Markets: The Role of Market Power and Industrial Relations in Rent Splitting between Workers and Firms

German Research Foundation (DFG)

The main purpose of this proposal is to grasp a firmer understanding of how employment rents are split between workers and employers in imperfect labour markets and how labour market institutions, such as unions and works councils, influence the distribution of rents. In that it not only promises new insights into the wage formation process and the likely consequences of important labour market trends like falling unionisation and worker codetermination, but also promises to inform important public policy debates, such as which rights should be granted to organised labour.

Professor Dr Steffen Müller

02.2019 ‐ 09.2019

Evaluation of the IAB Establishment Panel 2018 and Preparation of a Results Report for West and East Germany

Final report: Fehlende Fachkräfte in Deutschland – Unterschiede in den Betrieben und mögliche Erklärungsfaktoren: Ergebnisse aus dem IAB-Betriebspanel 2018. IAB-Forschungsbericht 10/2019. (in German, English abstract available)

Dr Eva Dettmann

04.2016 ‐ 03.2019

Wage and Employment Effects of Bankruptcies

German Research Foundation (DFG)

Obwohl die Folgen von Insolvenzen für betroffene Arbeitnehmer immer wieder Gegenstand öffentlicher Debatten sind (z.B. infolge der Insolvenz der Drogeriemarktkette Schlecker im Jahr 2012), ist die vorhandene empirische Evidenz dazu eher dürftig. Dies gilt in besonderem Maße für die Folgen von kleinbetrieblichen Insolvenzen, die weitaus häufiger stattfinden als öffentlichkeitswirksame Großinsolvenzen. Ziel dieses Projekts ist es daher, grundlegende Erkenntnisse über Insolvenzen und deren Folgen für betroffene Arbeitnehmer zu gewinnen.

Dr Daniel Fackler

01.2018 ‐ 12.2018

Evaluation of the IAB Establishment Panel 2017 and Preparation of a Results Report for West and East Germany

Final report: Lohnunterschiede zwischen Betrieben in Ost- und Westdeutschland: Ausmaß und mögliche Erklärungsfaktoren. Ergebnisse aus dem IAB-Betriebspanel 2017. IAB-Forschungsbericht 6/2018. (in German, English abstract available)

Professor Dr Steffen Müller

01.2017 ‐ 09.2017

Evaluation of the IAB Establishment Panel 2016 and Preparation of a Results Report for West and East Germany

Final report: Produktivitätsunterschiede zwischen West- und Ostdeutschland und mögliche Erklärungsfaktoren. Ergebnisse aus dem IAB-Betriebspanel 2016. IAB-Forschungsbericht 16/2017. (in German, English abstract available)

Professor Dr Steffen Müller

Refereed Publications

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Do Start-ups Provide Employment Opportunities for Disadvantaged Workers?

Daniel Fackler Michaela Fuchs Lisa Hölscher Claus Schnabel

in: ILR Review, forthcoming

Abstract

This article compares the hiring patterns of start-ups and incumbent firms to analyze whether start-ups offer relatively more job opportunities to disadvantaged workers. Using administrative linked employer–employee data for Germany that provide the complete employment biographies of newly hired workers, the authors show that young firms are more likely than incumbents to hire applicants who are older, foreign, or unemployed, or who have unstable employment histories, arrive from outside the labor force, or were affected by a plant closure. Analysis of entry wages shows that penalties for these disadvantaged workers, however, are higher in start-ups than in incumbent firms. Therefore, even if start-ups provide employment opportunities for certain groups of disadvantaged workers, the quality of these jobs in terms of initial remuneration appears to be low.

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Does Extended Unemployment Benefit Duration Ameliorate the Negative Employment Effects of Job Loss?

Daniel Fackler Jens Stegmaier Eva Weigt

in: Labour Economics, forthcoming

Abstract

We study the effect of job displacement due to bankruptcies on earnings and employment prospects of displaced workers and analyse whether extended potential unemployment benefit duration (PBD) ameliorates the negative consequences of job loss. Using German administrative linked employer-employee data, we find that job loss has long-lasting negative effects on earnings and employment. Displaced workers also more often end up in irregular employment relationships (part-time, marginal part-time employment, and temporary agency work) than their non-displaced counterparts. Applying a regression discontinuity approach that exploits a three months PBD extension at the age threshold of 50 we find hardly any effects of longer PBD on labour market outcomes of displaced workers.

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Who Buffers Income Losses after Job Displacement? The Role of Alternative Income Sources, the Family, and the State

Daniel Fackler Eva Weigt

in: LABOUR, forthcoming

Abstract

Using survey data from the German Socio‐Economic Panel (SOEP), this paper analyses the extent to which alternative income sources, reactions within the household context, and redistribution by the state attenuate earnings losses after job displacement. Applying propensity score matching and fixed effects estimations, we find that income from self‐employment reduces the earnings gap only slightly and severance payments buffer losses in the short run. On the household level, we find little evidence for an added worker effect whereas redistribution by the state within the tax and transfer system mitigates income losses substantially.

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Birds, Birds, Birds: Co-worker Similarity, Workplace Diversity and Job Switches

Boris Hirsch Elke J. Jahn Thomas Zwick

in: British Journal of Industrial Relations, forthcoming

Abstract

We investigate how the demographic composition of the workforce along the sex, nationality, education, age and tenure dimensions affects job switches. Fitting duration models for workers’ job‐to‐job turnover rate that control for workplace fixed effects in a representative sample of large manufacturing plants in Germany during 1975–2016, we find that larger co‐worker similarity in all five dimensions substantially depresses job‐to‐job moves, whereas workplace diversity is of limited importance. In line with conventional wisdom, which has that birds of a feather flock together, our interpretation of the results is that workers prefer having co‐workers of their kind and place less value on diverse workplaces.

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Firm Wage Premia, Industrial Relations, and Rent Sharing in Germany

Boris Hirsch Steffen Müller

in: ILR Review, forthcoming

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Working Papers

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Explaining Wage Losses after Job Displacement: Employer Size and Lost Firm Rents

Daniel Fackler Steffen Müller Jens Stegmaier

in: IWH Discussion Papers, No. 32, 2017

Abstract

Why does job displacement, e.g., following import competition, technological change, or economic downturns, result in permanent wage losses? The job displacement literature is silent on whether wage losses after job displacement are driven by lost firm wage premiums or worker productivity depreciations. We therefore estimate losses in wages and firm wage premiums. Premiums are measured as firm effects from a two-way fixed-effects approach, as described in Abowd, Kramarz, and Margolis (1999). Using German administrative data, we find that wage losses are, on average, fully explained by losses in firm wage premiums and that premium losses are largely permanent. We show that losses in wages and premiums are minor for workers displaced from small plants and strongly increase with pre-displacement firm size, which provides an explanation for the large and persistent wage losses that have been found in previous studies mostly focusing on displacement from large employers.

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Identifying Bankruptcies in German Social Security Data

Daniel Fackler Eva Hank Steffen Müller Jens Stegmaier

in: FDZ-Methodenreport, No. 10, 2017

Abstract

Many empirical studies about firm exits point out that it is important to distinguish between different types of closures, e.g., voluntary and involuntary liquidations. This report describes how exits due to bankruptcies can be identified in the German Establishment History Panel (BHP). In contrast to other closures, bankruptcies can be unambiguously regarded as indica-tion for economic failure and can therefore be interpreted as involuntary exits.

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Plant-level Employment Development before Collective Displacements: Comparing Mass Layoffs, Plant Closures, and Bankruptcies

Daniel Fackler Steffen Müller Jens Stegmaier

in: IWH Discussion Papers, No. 27, 2016

Abstract

To assess to what extent collective job displacements can be regarded as unanticipated exogenous shocks for affected employees, we analyze plant-level employment patterns before bankruptcy, plant closure without bankruptcy, and mass layoff. Utilizing administrative data covering all West German private sector plants, we find no systematic employment reductions prior to mass layoffs, a strong and long-lasting reduction prior to closures, and a much shorter shadow of death preceding bankruptcy. Our analysis of worker flows underlines that bankruptcies seem to struggle for survival while closures follow a shrinking strategy. We conclude that the scope of worker anticipation of upcoming job loss is smallest for mass layoffs and largest for closures without bankruptcy.

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