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

Your contact

Dr Daniel Fackler
Dr Daniel Fackler
Mitglied - Department Structural Change and Productivity
Send Message +49 345 7753-862

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)

The project analyzes the process and the consequences of firm failure. For the first time, evidence on the consequences of small firms’ bankruptcy on employees’ earnings and wages is provided. The project e.g. shows that employees of small firms are more likely to see their employer failing but, at the same time, face smaller earnings and wage losses than employees displaced from larger firms. Check the below research articles for further insights.

Overview of project results (in German)     Project website

Dr Daniel Fackler
Professor Dr Steffen Müller
Dr Jens Stegmaier

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

cover_labour-review-of-labour-economics-and-industrial-relations.png

Losing Work, Moving Away? Regional Mobility After Job Loss

Daniel Fackler Lisa Hölscher

in: LABOUR: Review of Labour Economics and Industrial Relations, No. 4, 2017

Abstract

Using German survey data, we investigate the relationship between involuntary job loss and regional mobility. Our results show that job loss has a strong positive effect on the propensity to relocate. We also analyse whether displaced workers who relocate to a different region after job loss are better able to catch up with non-displaced workers in terms of labour market performance than those staying in the same region. Our findings do not support this conjecture as we find substantial long-lasting earnings losses for movers and stayers and even slightly but not significantly higher losses for movers.

read publication

cover_oxford-economic-papers.png

Coming to Work While Sick: An Economic Theory of Presenteeism With an Application to German Data

Boris Hirsch Daniel S. J. Lechmann Claus Schnabel

in: Oxford Economic Papers, No. 4, 2017

Abstract

Presenteeism, i.e. attending work while sick, is widespread and associated with significant costs. Still, economic analyses of this phenomenon are rare. In a theoretical model, we show that presenteeism arises due to differences between workers in (healthrelated) disutility from workplace attendance. As these differences are unobservable by employers, they set wages that incentivise sick workers to attend work. Using a large representative German data set, we test several hypotheses derived from our model. In line with our predictions, we find that bad health status and stressful working conditions are positively related to presenteeism. Better dismissal protection, captured by higher tenure, is associated with slightly fewer presenteeism days, whereas the role of productivity and skills is inconclusive.

read publication

cover_industrielle-beziehungen.jpg

Works Councils and Other Plant-specific Forms of Employee Participation – Substitutes or Complements?

Stefan Ertelt Boris Hirsch Claus Schnabel

in: Industrielle Beziehungen, No. 3, 2017

Abstract

Using data from the IAB Establishment Panel (2004-2013), this paper analyses the incidence, development and interdependence of works councils and other, typically managementinitiated forms of employee participation (such as round tables) in Germany. In the private sector, the incidence of works councils and other forms of participation is similar, but in very few establishments both bodies exist simultaneously. Econometric analyses based on recursive probit models indicate that partly different factors explain the existence of works councils and other forms of participation. Both bodies correlate negatively with respect to their incidence, foundation, and dissolution. This suggests that there exists a predominantly substitutive relationship between works councils and other forms of employee participation.

read publication

cover_british-journal-of-industrial-relations.jpg

The Dynamic Effects of Works Councils on Plant Productivity: First Evidence from Panel Data

Steffen Müller Jens Stegmaier

in: British Journal of Industrial Relations, No. 2, 2017

Abstract

We estimate dynamic effects of works councils on labour productivity using newly available information from West German establishment panel data. Conditioning on plant fixed effects and control variables, we find negative productivity effects during the first five years after council introduction but a steady and substantial increase in the councils’ productivity effect thereafter. Our findings support a causal interpretation for the positive correlation between council existence and plant productivity that has been frequently reported in previous studies.

read publication

cover_american-economic-review.jpg

Transferability of Skills across Sectors and Heterogeneous Displacement Costs

Moises Yi Steffen Müller Jens Stegmaier

in: American Economic Review: Papers and Proceedings, No. 5, 2017

Abstract

We use rich German administrative data to estimate new measures of skill transferability between manufacturing and other sectors. These measures capture the value of workers' human capital when applied in different sectors and are directly related to workers' displacement costs. We estimate these transferability measures using a selection correction model, which addresses workers' endogenous mobility, and a novel selection instrument based on the social network of workers. Our results indicate substantial heterogeneity in how workers can transfer their skills when they move across sectors, which implies heterogeneous displacement costs that depend on the sector to which workers reallocate.

read publication

Working Papers

cover_DP_2017-32.jpg

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.

read publication

cover_FDZ-Methodenreport_2017-octobe.jpg

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.

read publication

cover_DP_2016-27.jpg

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.

read publication
  • 1
Mitglied der Leibniz-Gemeinschaft LogoTotal-Equality-LogoWeltoffen Logo