28.09.2017 • 35/2017
Joint Economic Forecast—Autumn 2017: Upturn Remains Robust—Amid Mounting Tensions
The German economic upturn has gained both in terms of strength and breadth. In addition to consumer spending, external trade and investments are now also contributing to economic expansion. These are the conclusions drawn by the economic research institutes in their autumn report for the German federal government. Whereas the very high economic momentum in the first half of the current year will slow slightly, expansion of economic output this year and next will exceed production capacity growth. As a result, overall capacity utilization will increase, with economic output exceeding potential output. Gross Domestic Product is likely to grow by 1.9 percent this year and by 2 percent in 2018 (calendar-adjusted: 2.2 and 2.1 percent, respectively).
Oliver Holtemöller
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Transferability of Skills across Sectors and Heterogeneous Displacement Costs
Moises Yi, Steffen Müller, Jens Stegmaier
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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Complex-task Biased Technological Change and the Labor Market
Colin Caines, Florian Hoffmann, Gueorgui Kambourov
Review of Economic Dynamics,
April
2017
Abstract
In this paper we study the relationship between task complexity and the occupational wage- and employment structure. Complex tasks are defined as those requiring higher-order skills, such as the ability to abstract, solve problems, make decisions, or communicate effectively. We measure the task complexity of an occupation by performing Principal Component Analysis on a broad set of occupational descriptors in the Occupational Information Network (O*NET) data. We establish four main empirical facts for the U.S. over the 1980–2005 time period that are robust to the inclusion of a detailed set of controls, subsamples, and levels of aggregation: (1) There is a positive relationship across occupations between task complexity and wages and wage growth; (2) Conditional on task complexity, routine-intensity of an occupation is not a significant predictor of wage growth and wage levels; (3) Labor has reallocated from less complex to more complex occupations over time; (4) Within groups of occupations with similar task complexity labor has reallocated to non-routine occupations over time. We then formulate a model of Complex-Task Biased Technological Change with heterogeneous skills and show analytically that it can rationalize these facts. We conclude that workers in non-routine occupations with low ability of solving complex tasks are not shielded from the labor market effects of automatization.
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Spinoffs in Germany: Characteristics, Survival, and the Role of their Parents
Daniel Fackler, A. Schmucker, Claus Schnabel
Small Business Economics,
No. 1,
2016
Abstract
Using a 50 % sample of all private sector establishments in Germany, we report that spinoffs are larger, initially employ more skilled and more experienced workers, and pay higher wages than other startups. We investigate whether spinoffs are more likely to survive than other startups, and whether spinoff survival depends on the quality and size of their parent companies, as suggested in some of the theoretical and empirical literature. Our estimated survival models confirm that spinoffs are generally less likely to exit than other startups. We also distinguish between pulled spinoffs, where the parent company continues after they are founded, and pushed spinoffs, where the parent company stops operations. Our results indicate that in western and eastern Germany and in all sectors investigated, pulled spinoffs have a higher probability of survival than pushed spinoffs. Concerning the parent connection, we find that intra-industry spinoffs and spinoffs emerging from better-performing or smaller parent companies are generally less likely to exit.
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16.12.2015 • 45/2015
German Economy: Strong domestic demand compensates for weak exports
The upturn of the German economy is expected to gain further momentum as a consequence of strong domestic demand. Real gross domestic product is expected to increase by 1.6% in 2016. Consumer prices are expected to rise by 0.9%. Unemployment is expected to rise slightly because it will take time to integrate refugees into the labour market.
Oliver Holtemöller
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03.12.2015 • 44/2015
Migration Affects Labour Market in Eastern Germany
Migration increasingly affects the labour market in Eastern Germany, having effects on employment and unemployment figures as well as the number of recipients of social assistance benefits under the SGB II regulations. Particularly with countries in Middle and Eastern Europe, countries affected by the European debt and confidence crisis and with people seeking asylum, there are large increases meeting the dimensions in Western Germany. However, migrants overall still form a significantly smaller percentage of the population and other labour market parameters in Eastern Germany, since migration was a lot stronger in Western Germany during the last decades. While on the short run negative effects on unemployment have to be expected, there are also chances, in the medium- and long-term, to soften the expectable demographic problems, if integration and qualification are supported.
Oliver Holtemöller
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Does the Plant Size–wage Differential Increase with Tenure? Affirming Evidence from German Panel Data
Daniel Fackler, Thorsten Schank, Claus Schnabel
Economics Letters,
2015
Abstract
We show that the major part of the plant size–wage premium in Germany is reflected in different wage growth patterns in plants of different size. This is consistent with the hypothesis that large firms ‘produce’ more skilled workers over time.
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Returns to Skills around the World: Evidence from PIAAC
Eric A. Hanushek, Guido Schwerdt, Simon Wiederhold, Ludger Woessmann
European Economic Review,
January
2015
Abstract
Existing estimates of the labor-market returns to human capital give a distorted picture of the role of skills across different economies. International comparisons of earnings analyses rely almost exclusively on school attainment measures of human capital, and evidence incorporating direct measures of cognitive skills is mostly restricted to early-career workers in the United States. Analysis of the new PIAAC survey of adult skills over the full lifecycle in 23 countries shows that the focus on early-career earnings leads to underestimating the lifetime returns to skills by about one quarter. On average, a one-standard-deviation increase in numeracy skills is associated with an 18 percent wage increase among prime-age workers. But this masks considerable heterogeneity across countries. Eight countries, including all Nordic countries, have returns between 12 and 15 percent, while six are above 21 percent with the largest return being 28 percent in the United States. Estimates are remarkably robust to different earnings and skill measures, additional controls, and various subgroups. Instrumental-variable models that use skill variation stemming from school attainment, parental education, or compulsory-schooling laws provide even higher estimates. Intriguingly, returns to skills are systematically lower in countries with higher union density, stricter employment protection, and larger public-sector shares.
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Labor Market Volatility, Skills, and Financial Globalization
Claudia M. Buch, C. Pierdzioch
Macroeconomic Dynamics,
No. 5,
2014
Abstract
We analyze the impact of financial globalization on volatilities of hours worked and wages of high-skilled and low-skilled workers. Using cross-country, industry-level data for the years 1970–2004, we establish stylized facts that document how volatilities of hours worked and wages of workers with different skill levels have changed over time. We then document that the volatility of hours worked by low-skilled workers has increased the most in response to the increase in financial globalization. We develop a dynamic stochastic general equilibrium model of a small open economy that is consistent with the empirical results. The model predicts that greater financial globalization increases the volatility of hours worked, and this effect is strongest for low-skilled workers.
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Has Labor Income Become More Volatile? Evidence from International Industry-Level Data
Claudia M. Buch
German Economic Review,
No. 4,
2013
Abstract
Changes in labor market institutions and the increasing integration of the world economy may affect the volatility of capital and labor incomes. This article documents and analyzes changes in income volatility using data for 11 industrialized countries, 22 industries and 35 years (1970–2004). The article has four main findings. First, the unconditional volatility of labor income has declined in parallel to the decline in macroeconomic volatility. Second, the industry-specific, idiosyncratic component of labor income volatility has hardly changed. Third, cross-sectional heterogeneity is substantial. If anything, the labor incomes of high- and low-skilled workers have become more volatile relative to the volatility of capital incomes. Fourth, the volatility of labor income relative to the volatility of capital income declines in the labor share. Trade openness has no clear-cut impact.
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