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 ClusterProductivity and Institutions
01.2020 ‐ 12.2023
The Rise of Populist Parties in Europe: The Dark Side of Globalization and Technological Change?
Globalisation may have increased prosperity in general, but has also led to unemployment, wage inequality, outward migration and, thus, ageing populations in many European regions. This project examines whether these economic burdens lead to votes for populist parties.
01.2019 ‐ 06.2022
MICROPROD („Raising EU Productivity: Lessons from Improved Micro Data“)
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.
This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 764810.
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.
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)
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.
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)
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)
Plant-level Employment Development before Collective Displacements: Comparing Mass Layoffs, Plant Closures and Bankruptcies
in: Applied Economics, No. 50, 2018
This article analyzes the development of employment levels and worker flows before bankruptcies, plant closure without bankruptcies and mass layoffs. Utilizing administrative plant-level data for Germany, 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 bankruptcies. Employment reductions in closing plants, in contrast to bankruptcies and mass layoffs, do not come along with increased worker flows. These patterns point to an intended and controlled shrinking strategy for closures without bankruptcy and to an unintended collapse for bankruptcies and mass layoffs.
Size of Training Firms and Cumulated Long-run Unemployment Exposure – The Role of Firms, Luck, and Ability in Young Workers’ Careers
in: International Journal of Manpower, No. 5, 2018
The purpose of this paper is to analyze how long-run unemployment of former apprentices depends on the size of their training firm and their ability.
Africa’s Skill Tragedy
in: Journal of Human Resources, No. 3, 2018
We study the importance of teacher subject knowledge for student performance in Sub-Saharan Africa using unique international assessment data for sixth-grade students and their teachers. To circumvent bias due to unobserved student heterogeneity, we exploit variation within students across math and reading. Teacher subject knowledge has a modest impact on student performance. Exploiting vast cross-country differences in economic development, we find that teacher knowledge is effective only in more developed African countries. Results are robust to adding teacher fixed effects and accounting for potential sorting based on subject-specific factors.
Do Employers Have More Monopsony Power in Slack Labor Markets?
in: ILR Review, No. 3, 2018
This article confronts monopsony theory’s predictions regarding workers’ wages with observed wage patterns over the business cycle. Using German administrative data for the years 1985 to 2010 and an estimation framework based on duration models, the authors construct a time series of the labor supply elasticity to the firm and estimate its relationship to the unemployment rate. They find that firms possess more monopsony power during economic downturns. Half of this cyclicality stems from workers’ job separations being less wage driven when unemployment rises, and the other half mirrors that firms find it relatively easier to poach workers. Results show that the cyclicality is more pronounced in tight labor markets with low unemployment, and that the findings are robust to controlling for time-invariant unobserved worker or plant heterogeneity. The authors further document that cyclical changes in workers’ entry wages are of similar magnitude as those predicted under pure monopsonistic wage setting.
Losing Work, Moving Away? Regional Mobility After Job Loss
in: LABOUR: Review of Labour Economics and Industrial Relations, No. 4, 2017
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.
Discrimination on the Child Care Market: A Nationwide Field Experiment?
in: IWH Discussion Papers, No. 12, 2023
We provide the first causal evidence of discrimination against migrants seeking child care. We send emails from fictitious parents to > 18,000 early child care centers across Germany, asking if there is a slot available and how to apply. Randomly varying names to signal migration background, we find that migrants receive 4.4 percentage points fewer responses. Responses to migrants also contain substantially fewer slot offers, are shorter, and less encouraging. Exploring channels, discrimination against migrants does not differ by the perceived educational background of the email sender. However, it does differ by regional characteristics, being stronger in areas with lower shares of migrants in child care, higher right-wing vote shares, and lower financial resources. Discrimination on the child care market likely perpetuates existing inequalities of opportunities for disadvantaged children.
Skill Mismatch and the Costs of Job Displacement
in: IWH Discussion Papers, No. 11, 2023
When workers are displaced from their jobs in mass layoffs or firm closures, they experience lasting adverse labor market consequences. We study how these consequences vary with the amount of skill mismatch that workers experience when returning to the labor market. Using novel measures of skill redundancy and skill shortage, we analyze individuals‘ work histories in Germany between 1975 and 2010. We estimate difference-in-differences models, using a sample in which we match displaced workers to statistically similar non-displaced workers. We find that displacements increase the probability of occupational change eleven fold, and that the type of skill mismatch after displacement is strongly associated with the magnitude of post-displacement earnings losses. Whereas skill shortages are associated with relatively quick returns to the counterfactual earnings trajectories that displaced workers would have experienced absent displacement, skill redundancy sets displaced workers on paths with permanently lower earnings.
The Value of Early-Career Skills
in: CESifo Working Paper, No. 10288, 2023
We develop novel measures of early-career skills that are more detailed, comprehensive, and labor-market-relevant than existing skill proxies. We exploit that skill requirements of apprenticeships in Germany are codified in state-approved, nationally standardized apprenticeship plans. These plans provide more than 13,000 different skills and the exact duration of learning each skill. Following workers over their careers in administrative data, we find that cognitive, social, and digital skills acquired during apprenticeship are highly – yet differently – rewarded. We also document rising returns to digital and social skills since the 1990s, with a more moderate increase in returns to cognitive skills.
Oxytocin, Empathy, Altruism and Charitable Giving: Experimental Evidence from Blood Donations
in: IWH Discussion Papers, No. 4, 2023
We conducted a field experiment in the natural setting of blood donations to test how oxytocin relates to empathy and altruism. We randomly assigned blood donors in the Croatian Institute for Transfusion Medicine to three groups with the aim to induce different levels of empathy by showing a neutral video to the donors from the control group and an emotional to the donors from the first and second treatment groups. In addition to watching the emotional video, donors from the second treatment group are given a gift which relates to the emotional story from the video. We find no effect of our treatment on induced levels of oxytocin. Null effects of our treatments could be explained by the above average baseline levels of oxytocin and inability of our treatments to provoke emotional stimuli in blood donors. Nonetheless, for our empathy measures we find the effect of gift exchange on empathic concerns, but not on perspective taking. After our experimental treatments, we followed the return of our blood donors for a whole year. We find that only variable which consistently predicts return for blood donation in stated period is the number of previous donations. From policy perspective it is an important finding. Especially for hospitals and other blood providers when faced with time and resource constraints.
Early Child Care and Labor Supply of Lower-SES Mothers: A Randomized Controlled Trial
in: CESifo Working Paper, No. 10178, 2022
We present experimental evidence that enabling access to universal early child care for families with lower socioeconomic status (SES) increases maternal labor supply. Our intervention provides families with customized help for child care applications, resulting in a large increase in enrollment among lower-SES families. The treatment increases lower-SES mothers' full-time employment rates by 9 percentage points (+160%), household income by 10%, and mothers' earnings by 22%. The effect on full-time employment is largely driven by increased care hours provided by child care centers and fathers. Overall, the treatment substantially improves intra-household gender equality in terms of child care duties and earnings.