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


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

IAB Establishment Panel 2017

Bundesagentur für Arbeit

Dr Eva Dettmann

Refereed Publications


Works Councils and Separations: Voice, Monopoly, and Insurance Effects

Boris Hirsch Thorsten Schank Claus Schnabel

in: Industrial Relations, No. 4, 2010


Using a large linked employer–employee data set for Germany, we find that the existence of a works council is associated with a lower separation rate to employment, in particular for workers with low tenure. While works council monopoly effects show up in all specifications, clear voice effects are only visible for low tenured workers. Works councils also reduce separations to nonemployment, and this impact is more pronounced for men. Insurance effects only show up for workers with tenure of more than 2 years. Our results indicate that works councils to some extent represent the interests of a specific clientele.

read publication


Kosten und Nutzen der Ausbildung an Tertiärbildungsinstitutionen im Vergleich

Martina Eschelbach G. Heineck Steffen Müller Regina T. Riphahn

in: Perspektiven der Wirtschaftspolitik, No. 2, 2010


We compare German institutions of tertiary education (universities and polytechnics) with respect to the cost of and the returns to their educational degrees. Based on cost data from two different sources we find that on average the expenditures of universities are lower than those of polytechnics when we consider expenditures per potential enrollee and per student enrolled during the regular education period. We apply data from the German Socio-economic Panel (2001–2007) to estimate the private returns to tertiary education and find higher returns to university than polytechnic training. These results are robust to a variety of alternative procedures.

read publication

The Gender Pay Gap under Duopsony: Joan Robinson meets Harold Hotelling

Boris Hirsch

in: Scottish Journal of Political Economy, No. 5, 2009


This paper presents an alternative explanation of the gender pay gap resting on a simple Hotelling-style duopsony model of the labour market. Since there are only two employers, equally productive women and men have to commute and face travel cost to do so. We assume that some women have higher travel cost, e.g., due to more domestic responsibilities. Employers exploit that women on average are less inclined to commute and offer lower wages to all women. Since women's firm-level labour supply is for this reason less wage-elastic, this model is in line with Robinson's explanation of wage discrimination.

read publication

Capital Stock Approximation using Firm Level Panel Data: A Modified Perpetual Inventory Approach

Steffen Müller

in: Jahrbücher für Nationalökonomie und Statistik, No. 4, 2008


Many recent studies exploring conditional factor demand or factor substitution issues use firm level panel data. A considerable number of establishment panels contains no direct information on the capital input, necessary for production or cost function estimation. Incorrect measurement of capital leads to biased estimates and casts doubt on any inference on output elasticities or input substitution properties. The perpetual inventory approach, commonly used for long panels, is a method that attenuates these problems. In this paper a modified perpetual inventory approach is proposed. This method provides more reliable measures for capital input when short firm panels are used and no direct information on capital input is available. The empirical results based on a replication study of Addison et al. (2006) support the conclusion that modified perpetual inventory is superior to previous attempts in particular when fixed effects estimation techniques are used. The method thus makes a considerable number of recently established firm panels accessible to more sophisticated production function or factor demand analyses.

read publication

Working Papers


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


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


Identifying Bankruptcies in German Social Security Data

Daniel Fackler Eva Hank Steffen Müller Jens Stegmaier

in: FDZ-Methodenreport, No. 10, 2017


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


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

Daniel Fackler Eva Hank

in: IWH Discussion Papers, No. 28, 2016


Using survey data from the German Socio-Economic Panel (SOEP), this paper analyses to what extent 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 high individual earnings losses after job displacement and only limited convergence. Income from selfemployment slightly reduces the earnings gap and severance payments buffer losses in the short run. On the household level, we find substantial and rather persistent losses in per capita labour income. We do not find that increased labour supply by other household members contributes to the compensation of the income losses. Most importantly, our results show that redistribution within the tax and transfer system substantially mitigates income losses of displaced workers both in the short and the long run whereas other channels contribute only little.

read publication


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


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