Market Power, Input Costs, and Technology

The research group deals with the empirical analysis of the dynamics and determinants of economic development. Thereby, we recognize that these are individual heterogeneous firms with their specific capabilities to innovate and to efficiently allocate scarce resources that shape patterns at higher level of aggregation (e.g. cause structural change). While following a micro-level approach we aim at adding to the understanding of the actual mechanisms and dynamics in the development of economies as well as for the development of policy instruments. For instance, one of the current research projects deals with the effect of import competition on the productivity and innovating behaviour of firms as well as on the dynamic in and of industries

The research group works closely together with CompNet.

Research Cluster
Productivity and Institutions

Your contact

Dr Matthias Mertens
Dr Matthias Mertens
Mitglied - Department Structural Change and Productivity
Send Message +49 345 7753-707 Personal page


09.2016 ‐

The Competitiveness Research Network (CompNet)

Funding institutions: European Central Bank (ECB), European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD), Tinbergen Institute, European Commission.

The Competitiveness Research Network (CompNet) provides a forum for high level research and policy analysis in the areas of competitiveness and productivity. Its main activities include the regular updating of its micro-based competitiveness database for European countries, unprecedented in terms of coverage and cross-country comparability.

Professor Reint E. Gropp, PhD

Refereed Publications


European Firm Concentration and Aggregate Productivity

Tommaso Bighelli Filippo di Mauro Marc Melitz Matthias Mertens

in: Journal of the European Economic Association, forthcoming


This paper derives a European Herfindahl–Hirschman concentration index from 15 micro-aggregated country datasets. In the last decade, European concentration rose due to a reallocation of economic activity toward large and concentrated industries. Over the same period, productivity gains from an increasing allocative efficiency of the European market accounted for 50% of European productivity growth while markups stayed constant. Using country-industry variation, we show that changes in concentration are positively associated with changes in productivity and allocative efficiency. This holds across most sectors and countries and supports the notion that rising concentration in Europe reflects a more efficient market environment rather than weak competition and rising market power.

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Paying Outsourced Labor: Direct Evidence from Linked Temp Agency-Worker-Client Data

Andres Drenik Simon Jäger Pascuel Plotkin Benjamin Schoefer

in: Review of Economics and Statistics, forthcoming


We estimate how much firms differentiate pay premia between regular and outsourced workers in temp agency work arrangements. We leverage unique Argentinian administrative data that feature links between user firms (the workplaces where temp workers perform their labor) and temp agencies (their formal employers). We estimate that a high-wage user firm that pays a regular worker a 10% premium pays a temp worker on average only a 4.9% premium, compared to what these workers would earn in a low-wage user firm in their respective work arrangements—the midpoint between the benchmarks for insiders (one) and the competitive spot-labor market (zero).

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Marginal Jobs and Job Surplus: A Test of the Efficiency of Separations

Simon Jäger Benjamin Schoefer Josef Zweimüller

in: Review of Economic Studies, forthcoming


We present a test of Coasean theories of efficient separations. We study a cohort of jobs from the introduction through the repeal of a large age- and region-specific unemployment benefit extension in Austria. In the treatment group, 18.5% fewer jobs survive the program period. According to the Coasean view, the destroyed marginal jobs had low joint surplus. Hence, after the repeal, the treatment survivors should be more resilient than the ineligible control group survivors. Strikingly, the two groups instead exhibit identical post-repeal separation behavior. We provide, and find suggestive evidence consistent with, an alternative model in which wage rigidity drives the inefficient separation dynamics.

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The East-West German Gap in Revenue Productivity: Just a Tale of Output Prices?

Matthias Mertens Steffen Müller

in: Journal of Comparative Economics, forthcoming


East German manufacturers’ revenue productivity is substantially below West German levels, even three decades after German unification. Using firm-product-level data with product quantities and prices, we analyze the role of product specialization and show that the prominent “extended work bench hypothesis” cannot explain these sustained productivity differences. Eastern firms specialize in simpler product varieties generating less consumer value and being manufactured with less or cheaper inputs. Yet, such specialization cannot explain the productivity gap because Eastern firms are physically less productive for given product prices. Hence, there is a genuine price-adjusted physical productivity disadvantage of Eastern compared to Western firms.

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What Does Codetermination Do?

Simon Jäger Shakked Noy Benjamin Schoefer

in: ILR Review, No. 4, 2022


The authors provide a comprehensive overview of codetermination, that is, worker representation in firms’ governance and management. The available micro evidence points to zero or small positive effects of codetermination on worker and firm outcomes and leaves room for moderate positive effects on productivity, wages, and job stability. The authors also present new country-level, general-equilibrium event studies of codetermination reforms between the 1960s and 2010s, finding no effects on aggregate economic outcomes or the quality of industrial relations. They offer three explanations for the institution’s limited impact. First, existing codetermination laws convey little authority to workers. Second, countries with codetermination laws have high baseline levels of informal worker voice. Third, codetermination laws may interact with other labor market institutions, such as union representation and collective bargaining. The article closes with a discussion of the implications for recent codetermination proposals in the United States.

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Working Papers

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