Based on the sufficient statistics approach developed by Huang and Ottaviano (2024), we show how the state of technology of European industries relative to the rest of the world can be empirically assessed in a way that is simple in terms of computation, parsimonious in terms of data requirements, but still comprehensive in terms of information. The lack of systematic cross-industry correlation between export specialization and technological advantage suggests that standard measures of revealed comparative advantage only imperfectly capture a country’s technological prowess due to the concurrent influences of factor prices, market size, markups, firm selection and market share reallocation.

Based on the sufficient statistics approach developed by Huang and Ottaviano (2024), we show how the state of technology of European industries relative to the rest of the world can be empirically assessed in a way that is simple in terms of computation, parsimonious in terms of data requirements, but still comprehensive in terms of information. The lack of systematic cross-industry correlation between export specialization and technological advantage suggests that standard measures of revealed comparative advantage only imperfectly capture a country’s technological prowess due to the concurrent influences of factor prices, market size, markups, firm selection and market share reallocation.

This article examines how collective bargaining through unions and workplace codetermination through works councils relate to labor market imperfections and how labor market imperfections relate to employer wage premia. Based on representative German plant data for the years 1999-2016, the authors document that 70% of employers pay wages below the marginal revenue product of labor and 30% pay wages above that level. Findings further show that the prevalence of wage markdowns is significantly smaller when organized labor is present, and that the ratio of wages to the marginal revenue product of labor is significantly larger. Finally, the authors document a close link between labor market imperfections and mean employer wage premia, that is, wage differences between employers corrected for worker sorting.

We study the effect of judicial bias favoring firm continuation in bankruptcy on the labor market outcomes of employees by exploiting the random assignment of cases across courts in the State of São Paulo in Brazil. Employees of firms assigned to courts that favor firm continuation are more likely to stay with their employer, but they earn, on average, lower wages three to five years after bankruptcy. We discuss several potential mechanisms that can rationalize this result, and provide evidence that imperfect information about outside options in the local labor market and adjustment costs associated with job change play an important role.

We study changes in job reallocation in Europe after 2000 using novel microaggregated data that we collected for 19 European countries. In all countries, we document broad-based declines in job reallocation rates that concern most economic sectors and size classes. These declines are mainly driven by dynamics within sectors, size, and age classes rather than by compositional changes. Simultaneously, employment shares of young firms decline. Consistent with US evidence, firms’ employment has become less responsive to productivity shocks. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive and apply a firm-level framework that relates changes in firms’ market power, labor market imperfections, and production technology to firms’ responsiveness and job reallocation. Using German firm-level data, we find that changes in markups and labor output elasticities, rather than adjustment costs, are key in rationalizing declining responsiveness.

This paper examines how collective bargaining through unions and workplace co-determination through works councils relate to labour market imperfections and how labour market imperfections relate to employer wage premia. Based on representative German plant data for the years 1999–2016, we document that 70% of employers pay wages below the marginal revenue product of labour and 30% pay wages above. We further find that the prevalence of wage mark-downs is significantly smaller when organised labour is present and that the ratio of wages to the marginal revenue product of labour is significantly bigger. Finally, we document a close link between labour market imperfections and mean employer wage premia, that is wage differences between employers corrected for worker sorting.

This dissertation is about questions on how German institutions of industrial relations shape plant-level outcomes, and how this influences employer wage differentials. Employer wage differentials point toward imperfect labor markets in which both, employers and employees, benefit from employment rents. It puts the employer at the center of explaining wage differences and how employer characteristics influence these, over which individual employees have only limited control. Arguably, how employers and employees split these rents depend on industrial relations. The German dual model of industrial relations consists of collective bargaining at the industry level and worker co-determination through works councils at the plant level. This dissertation illuminates different aspects of industrial relations and how rent-sharing mechanisms can explain wage inequality in Germany. It does not only focus on how industrial relations shape labor market power and whether labor market power translates into the level and dispersion of employer wage premia. It also contributes to questions that explain differences in plant-level outcomes relating to industrial relations. These include the role of worker co-determination on assortative matching. It is further investigated how works councils affect plant-level reactions during economy-wide shocks. In addition, it offers new causal evidence of rent-sharing mechanisms in Germany. The insights of this dissertation are relevant for policy and economic research alike. It contributes to a better understanding of the role of organized labor in imperfect labor markets and its determinants of employer wage differentials. It approaches the role of worker co-determination from different angles that are important at times of erosion of formal organized labor but gaining interest in worker representation.