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 InstitutionsYour contact
EXTERNAL FUNDING
10.2022 ‐ 09.2024
MULTIMSPROD/MULTIMSPROD AUT
European Commission
Enhancing the Micro Foundation of the Research Output of National Productivity Board (NPBs). Using CompNet and expanding its Micro Data Infrastructure (MDI).
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.
Refereed Publications
How Does Industry Specialization Affect the Efficiency of Regional Innovation Systems?
in: Annals of Regional Science, No. 1, 2010
Abstract
This study analyzes the relationship between the specialization of a region in certain industries and the efficiency of the region in generating new knowledge. The efficiency measure is constructed by relating regional R&D input and output. An inversely u-shaped relationship is found between regional specialization and R&D efficiency, indicating the presence of externalities of both Marshall and Jacobs’ type. Further factors influencing efficiency are externalities resulting from high R&D intensity of the local private sector as well as knowledge from local public research institutions. The impact of both the specialization and the additional factors is, however, different for regions at different efficiency levels.
Universities and Innovation in Space
in: Industry and Innovation, No. 2, 2007
Abstract
We investigate the role of universities as a knowledge source for regional innovation processes. The contribution of universities is tested on the level of German NUTS‐3 regions (Kreise) by using a variety of indicators. We find that the intensity and quality of the research conducted by the universities have a significant effect on regional innovative output while pure size is unimportant. Therefore, a policy that wants to promote regional innovation processes by building up universities should place substantial emphasis on the intensity and quality of the research conducted there. We also find the effects of universities to be concentrated in space. Obviously, the geographical proximity to particular knowledge sources is important for regional innovative activities.
Worker Beliefs about Outside Options
in: Quarterly Journal of Economics, 2099
Abstract
Standard labor market models assume that workers hold accurate beliefs about the external wage distribution, and hence their outside options with other employers. We test this assumption by comparing German workers’ beliefs about outside options with objective benchmarks. First, we find that workers wrongly anchor their beliefs about outside options on their current wage: workers that would experience a 10% wage change if switching to their outside option only expect a 1% change. Second, workers in low-paying firms underestimate wages elsewhere. Third, in response to information about the wages of similar workers, respondents correct their beliefs about their outside options and change their job search and wage negotiation intentions. Finally, we analyze the consequences of anchoring in a simple equilibrium model. In the model, anchored beliefs keep overly pessimistic workers stuck in low-wage jobs, which gives rise to monopsony power and labor market segmentation.
Working Papers
The Aggregate Effects of the Decline of Disruptive Innovation
in: IWH Discussion Papers, No. 22, 2023
Abstract
This paper proposes a model that explains both recently documented facts about the decline of disruptive innovation and the decline in productivity growth as the result of large firms trying to monopolize technologies by poaching inventors from disruptive activities. To come to this conclusion, the paper builds an endogenous growth model with inventor labor markets on which firms can interact strategically. To inform this model, I perform an event study of the effect of disruptive inventions on their technology fields using PATSTAT (1980-2010). I document that technology classes without disruption slowly trend towards incrementalism and that after a disruption, more patents get registered and research becomes less incremental.
Minimum Wages, Productivity, and Reallocation
in: IZA Discussion Paper, No. 16160, 2023
Abstract
We study the productivity effect of the German national minimum wage by applying administrative firm data. At the firm level, we confirm positive effects on wages and negative employment effects and document higher productivity even net of output price increases. We find higher wages but no employment effects at the level of aggregate industry × region cells. The minimum wage increased aggregate productivity in manufacturing. We do not find that employment reallocation across firms contributed to these aggregate productivity gains, nor do we find improvements in allocative efficiency. Instead, the productivity gains from the minimum wage result from within-firm productivity improvements only.
Minimum Wages, Productivity, and Reallocation
in: IWH Discussion Papers, No. 8, 2023
Abstract
We study the productivity effect of the German national minimum wage by applying administrative firm data. At the firm level, we confirm positive effects on wages and negative employment effects and document higher productivity even net of output price increases. We find higher wages but no employment effects at the level of aggregate industry × region cells. The minimum wage increased aggregate productivity in manufacturing. We do not find that employment reallocation across firms contributed to these aggregate productivity gains, nor do we find improvements in allocative efficiency. Instead, the productivity gains from the minimum wage result from within-firm productivity improvements only.
Do Larger Firms Exert More Market Power? Markups and Markdowns along the Size Distribution
in: IWH Discussion Papers, No. 1, 2023
Abstract
Several models posit a positive cross-sectional correlation between markups and firm size, which characterizes misallocation, factor shares, and gains from trade. Accounting for labor market power in markup estimation, we find instead that larger firms have lower product markups but higher wage markdowns. The negative markup-size correlation turns positive when conditioning on markdowns, suggesting interactions between product and labor market power. Our findings are robust to common criticism (e.g., price bias, non-neutral technology) and hold across 19 European countries. We discuss possible mechanisms and resulting implications, highlighting the importance of studying input and output market power in a unified framework.
Wirtschaftliche Folgen des Gaspreisanstiegs für die deutsche Industrie
in: Sachverständigenrat Wirtschaft, No. 4, 2022
Abstract
Diese Analyse nutzt amtliche Mikrodaten für die deutsche Industrie. Auf Ebene fein untergliederter Produkte werden der Verbrauch an Erdgas und der heimische Produktumsatz mit Daten der Vereinten Nationen zu Exporten und Importen verknüpft. Es zeigt sich, dass die 300 Produkte mit dem höchsten Gasverbrauch innerhalb der deutschen Industrie für knapp 90% des Gasverbrauchs der Industrie stehen, dass bei Gaspreiserhöhungen um das Vierfache gegenüber den Jahren 2015-2017 die Kosten für das durchschnittliche Produkt um 12 Cent pro Euro Umsatz steigen und dass ein Produktionsstopp der Produkte, die sowohl überdurchschnittlich gasintensiv sind als auch überdurchschnittlich leicht durch Importe substituiert werden können, 26% des Gesamtgasverbrauchs der Industrie einspart, aber weniger als 3% des Umsatzes der Industrie kostet.