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 Institutions

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Dr André Diegmann
Dr André Diegmann
Mitglied - Department Structural Change and Productivity
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EXTERNAL FUNDING

01.2020 ‐ 06.2024

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

VolkswagenStiftung

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.

see project's webpage

Professor Dr Steffen Müller

01.2019 ‐ 06.2022

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.

see project's webpage

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.

see project's page on DFG website

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

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Losing Work, Moving Away? Regional Mobility After Job Loss

Daniel Fackler Lisa Rippe

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.

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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.

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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.

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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.

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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.

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Working Papers

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Where Do STEM Graduates Stem from? The Intergenerational Transmission of Comparative Skill Advantages

Eric A. Hanushek Babs Jacobs Guido Schwerdt Rolf van der Velden Stan Vermeulen Simon Wiederhold

in: IWH Discussion Papers, No. 13, 2023

Abstract

The standard economic model of occupational choice following a basic Roy model emphasizes individual selection and comparative advantage, but the sources of comparative advantage are not well understood. We employ a unique combination of Dutch survey and registry data that links math and language skills across generations and permits analysis of the intergenerational transmission of comparative skill advantages. Exploiting within-family between-subject variation in skills, we show that comparative advantages in math of parents are significantly linked to those of their children. A causal interpretation follows from a novel IV estimation that isolates variation in parent skill advantages due to their teacher and classroom peer quality. Finally, we show the strong influence of family skill transmission on children’s choices of STEM fields.

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Discrimination on the Child Care Market: A Nationwide Field Experiment?

Henning Hermes Philipp Lergetporer Fabian Mierisch Frauke Peter Simon Wiederhold

in: IWH Discussion Papers, No. 12, 2023

Abstract

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.

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The Value of Early-Career Skills

Christina Langer Simon Wiederhold

in: CESifo Working Paper, No. 10288, 2023

Abstract

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.

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Oxytocin, Empathy, Altruism and Charitable Giving: Experimental Evidence from Blood Donations

Irena Jukić Dejan Kovač Danijela Vuletić Čugalj

in: IWH Discussion Papers, No. 4, 2023

Abstract

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.

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Early Child Care and Labor Supply of Lower-SES Mothers: A Randomized Controlled Trial

Henning Hermes Marina Krauss Philipp Lergetporer Frauke Peter Simon Wiederhold

in: CESifo Working Paper, No. 10178, 2022

Abstract

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.

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