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.

Using a newly collected dataset of robot use at the plant level from 2014 to 2018, we provide the first microscopic portrait of robotisation in Germany and study the potential determinants of robot adoption. Our descriptive analysis uncovers five stylised facts concerning both extensive and, perhaps more importantly, intensive margin of plant-level robot use: (1) Robot use is relatively rare with only 1.55% German plants using robots in 2018. (2) The distribution of robots is highly skewed. (3) New robot adopters contribute substantially to the recent robotisation. (4) Robot users are exceptional along several dimensions of plant-level characteristics. (5) Heterogeneity in robot types matters. Our regression results further suggest plant size, low-skilled labour share, and exporter status to have strong and positive effect on future probability of robot adoption. Manufacturing plants impacted by the introduction of minimum wage in 2015 are also more likely to adopt robots. However, controlling for plant size, we find that plant-level productivity has no, if not negative, impact on robot adoption.

Why does job displacement, e.g., following import competition, technological change, or economic downturns, result in permanent wage losses? The job displacement literature is silent on whether wage losses after job displacement are driven by lost firm wage premiums or worker productivity depreciations. We therefore estimate losses in wages and firm wage premiums. Premiums are measured as firm effects from a two-way fixed-effects approach, as described in Abowd, Kramarz, and Margolis (1999). Using German administrative data, we find that wage losses are, on average, fully explained by losses in firm wage premiums and that premium losses are largely permanent. We show that losses in wages and premiums are minor for workers displaced from small plants and strongly increase with pre-displacement firm size, which provides an explanation for the large and persistent wage losses that have been found in previous studies mostly focusing on displacement from large employers.

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.

EU-TE trade is increasingly characterised by intra-industry trade. For some countries (Czech Republic), the share of intra-industry trade in total trade with the EU approaches 60 percent. The decomposition of intra-industry trade into horizontal and vertical shares reveals overwhelming vertical structures with strong quality advantages for the EU and shrinking quality advantages for TE countries wherever trade has been liberalised. Empirical research on factors determining this structure in an EU-TE framework has lagged theoretical and empirical research on horizontal trade and vertical trade in other regions of the world. The main objective of this paper is, therefore, to contribute to the ongoing debate over EU-TE trade structures, by offering an explanation of intra-industry trade. We utilize a cross-country approach in which relative wage differences and country size play a leading role. In addition, as implied by a model of the productquality

cycle, we examine income distribution factors as determinates of the emerging

EU-TE structure of trade flows. Using OLS regressions, we find first, that relative

differences in wages (per capita income) and country size explain intra-industry trade, when trade is vertical and completely liberalized and second, that cross country differences in income distribution play no explanatory role. We conclude that if increasing wage differences resulted from an increasing productivity gap between highquality and low-quality industries, then vertical structures will, over the long-term create significant barriers for the increase in TE incomes and lowering EU-TE income differentials.