Explaining Wage Losses After Job Displacement: Employer Size and Lost Firm Wage Premiums
Daniel Fackler, Steffen Müller, Jens Stegmaier
Journal of the European Economic Association,
No. 5,
2021
Abstract
This paper investigates whether wage losses after job displacement are driven by lost firm wage premiums or worker productivity depreciations. We estimate losses in wages and firm wage premiums, the latter being measured as firm effects from a two-way fixed-effects wage decomposition. Using new German administrative data on displacements from small and large employers, we find that wage losses are to a large extent explained by losses in firm wage premiums and that premium losses are largely permanent. We show that losses strongly increase with pre-displacement employer size. This provides an explanation for large and persistent wage losses reported in previous displacement studies typically focusing on large employers, only.
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Worker Participation in Decision-making, Worker Sorting, and Firm Performance
Steffen Müller, Georg Neuschäffer
Industrial Relations,
No. 4,
2021
Abstract
Worker participation in decision-making is often associated with high-wage and high-productivity firm strategies. Using linked employer–employee data for Germany and worker fixed effects from a two-way fixed-effects model of wages capturing observed and unobserved worker quality, we find that plants with formal worker participation via works councils indeed employ higher quality workers. We show that worker quality is already higher in plants before council introduction and further increases after the introduction. Importantly, we corroborate previous studies by showing positive productivity and profitability effects even after taking into account worker sorting.
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14.10.2021 • 26/2021
East German economy less affected by supply bottlenecks than German economy as a whole, but lower vaccination rates pose risks – Implications of the Joint Economic Forecast Autumn 2021 and of Länder data from recent publications of the Federal Statisti
Supply bottlenecks affect production in the manufacturing sector in East Germany somewhat less than in Germany as a whole. With 1.8%, the increase in Gross Domestic Product in eastern Germany in 2021 therefore is likely to be lower than in Germany as a whole (2.4%); this gap is likely to enlarge in 2022, when supply bottlenecks hamper less (East Germany: 3.6%, Germany 4.8%).
Oliver Holtemöller
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The Impact of Delay: Evidence from Formal Out-of-Court Restructuring
Randall K. Filer, Dejan Kovač, Jacob N. Shapiro, Stjepan Srhoj
Abstract
Bankruptcy restructuring procedures are used in most legal systems to decide the fate of businesses facing financial hardship. We study how bargaining failures in such procedures impact the economic performance of participating firms in the context of Croatia, which introduced a „pre-bankruptcy settlement“ (PBS) process in the wake of the Great Recession of 2007 - 2009. Local institutions left over from the communist era provide annual financial statements for both sides of more than 180,000 debtor-creditor pairs, enabling us to address selection into failed negotiations by matching a rich set of creditor and debtor characteristics. Failures to settle at the PBS stage due to idiosyncratic bargaining problems, which effectively delays entry into the standard bankruptcy procedure, leads to a lower rate of survival among debtors as well as reduced employment, revenue, and profits. We also track how bargaining failures diffuse through the network of creditors, finding a significant negative effect on small creditors, but not others. Our results highlight the impact of delay and the importance of structuring bankruptcy procedures to rapidly resolve uncertainty about firms‘ future prospects.
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Access to Public Capital Markets and Employment Growth
Alexander Borisov, Andrew Ellul, Merih Sevilir
Journal of Financial Economics,
No. 3,
2021
Abstract
This paper examines the effect of going public on firm-level employment. To establish a causal effect, we employ a novel data set of private firms to investigate employment growth in IPO firms relative to a group of firms that file for an IPO but subsequently withdraw their offering. We find that employment increases significantly after going public, and the increase is more pronounced in industries with requirements for highly skilled labor and greater dependence on external finance. Improved ability to undertake acquisitions and a strategic shift toward commercialization, rather than agency problems, explain employment growth. Overall, these results highlight the importance of going public for firms' employment policies.
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Paid Vacation Use: The Role of Works Councils
Laszlo Goerke, Sabrina Jeworrek
Economic and Industrial Democracy,
No. 3,
2021
Abstract
The article investigates the relationship between codetermination at the plant level and paid vacation in Germany. From a legal perspective, works councils have no impact on vacation entitlements, but they can affect their use. Employing data from the German Socio-Economic Panel (SOEP), the study finds that male employees who work in an establishment, in which a works council exists, take almost two additional days of paid vacation annually, relative to employees in an establishment without such institution. The effect for females is much smaller, if discernible at all. The data suggest that this gender gap might be due to the fact that women exploit vacation entitlements more comprehensively than men already in the absence of a works council.
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Hysteresis from Employer Subsidies
Emmanuel Saez, Benjamin Schoefer, David Seim
Journal of Public Economics,
August
2021
Abstract
This paper uses administrative data to analyze a large and 8-year long employer payroll tax rate cut in Sweden for young workers aged 26 or less. We replicate previous results documenting that during the earlier years of the reform, it raised youth employment among the treated workers, driven by labor demand (as workers’ take-home wages did not respond). First, drawing on additional years of data, this paper then documents that the longer-run effects during the reform are twice as large as the medium-run effects. Second, we document novel labor-demand-driven “hysteresis” from this policy – i.e. persistent employment effects even after the subsidy no longer applies – along two dimensions. Over the lifecycle, employment effects persist even after workers age out of eligibility. Three years after the repeal, employment remains elevated at the maximal reform level in the formerly subsidized ages. These hysteresis effects more than double the direct employment effects of the reform. Discrimination against young workers in job posting fell during the reform and does not bounce back after repeal, potentially explaining our results.
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International Trade Barriers and Regional Employment: The Case of a No-Deal Brexit
Hans-Ulrich Brautzsch, Oliver Holtemöller
Journal of Economic Structures,
No. 11,
2021
Abstract
We use the World Input–Output Database (WIOD) combined with regional sectoral employment data to estimate the potential regional employment effects of international trade barriers. We study the case of a no-deal Brexit in which imports to the United Kingdom (UK) from the European Union (EU) would be subject to tariffs and non-tariff trade costs. First, we derive the decline in UK final goods imports from the EU from industry-specific international trade elasticities, tariffs and non-tariff trade costs. Using input–output analysis, we estimate the potential output and employment effects for 56 industries and 43 countries on the national level. The absolute effects would be largest in big EU countries which have close trade relationships with the UK, such as Germany and France. However, there would also be large countries outside the EU which would be heavily affected via global value chains, such as China, for example. The relative effects (in percent of total employment) would be largest in Ireland followed by Belgium. In a second step, we split up the national effects on the NUTS-2 level for EU member states and additionally on the county (NUTS-3) level for Germany. The share of affected workers varies between 0.03% and 3.4% among European NUTS-2 regions and between 0.15% and 0.4% among German counties. A general result is that indirect effects via global value chains, i.e., trade in intermediate inputs, are more important than direct effects via final demand.
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15.06.2021 • 16/2021
Increase in personal contacts spurs economic activity
This summer the economic outlook in Germany is bright. As the pandemic is in retreat, the restrictions that have hampered many service activities are likely to be gradually lifted, and a strong boost in private purchases can be expected. The Halle Institute for Economic Research (IWH) forecasts that gross domestic product will increase by 3.9% in 2021 and by 4.0% in 2022. Production in East Germany is expected to increase by 3% in both years, respectively.
Oliver Holtemöller
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06.05.2021 • 13/2021
IWH Bankruptcy Update: Upward Trend in Bankruptcies Stopped; Reintroduction of Filing Requirement Unlikely to Generate Bankruptcy Wave
Following a rising trend in recent months, the number of corporate bankruptcies fell significantly in April. The number of impacted jobs also remained at modest levels. After a recent sharp rise in the bankruptcy statistics for microbusinesses (which has drawn little press attention), the upward trend for this subcategory loses steam. These are the key findings of the IWH Bankruptcy Update, which provides monthly statistics on corporate bankruptcies in Germany.
Steffen Müller
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