Job mobility as a new explanation for the immigrant-native wage gap
23 March 2015
Theoretically, wage gaps between migrants and natives can be explained by human capital theory through either depreciation in human capital with migration or differences in endowments. However, even after considering human capital measures, an unexplained difference remains. We assume that differences in the employment trajectories of migrants and natives contribute to wages that diverge after labor market entrance. Utilizing a rich longitudinal data set (ALWA-ADIAB), we analyze the job mobility of migrants and natives in Germany and distinguish among voluntary, involuntary, internal and other job changes.
IAB-Discussion Paper 12/2015
Direct and indirect effects of mass layoffs
20 March 2015
Using a novel data set that contains precise geo-referenced information on the universe of German establishments, we analyse both the direct effects of mass layoffs and any indirect impacts on workers who are employed in the vicinity of an establishment being closed down. In line with the literature, we document economically significant impacts of mass layoffs on the employment and earnings prospects of directly displaced workers. In contrast, neither an individual-level difference-indifference approach nor an alternative establishment-level approach inspired by the spatial economics literature find evidence of additional adverse economic effects for workers or establishments indirectly exposed to mass layoffs.
IAB-Discussion Paper 11/2015
From deregulation to re-regulation
12 March 2015
From the mid-1980s until 2005 the German labour market was characterised by continuous deregulation. In the period of an improving German labour market, the German governments have since imposed measures to re-regulate the labour market in order to strengthen employees' rights. At the same time one can observe a tendency towards atypical forms of employment and an increase in low-wage employment. Two closely interrelated questions arise: What role did deregulation play with respect to the overall improvement of the German labour market and shifts in the employment structure? How could re-regulation impact labour market performance and employment structure in the future? The paper presents evidence that institutional reforms were an important driver of the improvement of the German labour market as well as of changes in the employment structure but definitely not the only one.
IAB-Discussion Paper 10/2015
Multinational resilience or dispensable jobs?
03 March 2015
This article investigates the employment development of Czech-based firms in German ownership in the years around the Great Recession of 2008/2009. The intense involvement of German firms in the economy of the neighboring country via foreign direct investment (FDI) raises the question whether under the conditions of a historically deep global downturn, Czech employees in multinational companies were confronted with an increased volatility of their jobs.
IAB-Discussion Paper 9/2015
Do changes in regulation affect temporary agency workers' job satisfaction?
18 February 2015
This paper evaluates the impact on temporary agency workers' job satisfaction of a reform that considerably changed regulations covering the temporary help service sector in Germany. We isolate the causal effect of this reform by combining a difference- in-difference and matching approach and using rich survey data. We find that the change of the law substantially decreased agency workers' job satisfaction while regular workers' job satisfaction remained unchanged. Further analysis reveals that the negative effect on agency workers' job satisfaction can be attributed to a decrease in wages and an increase in perceived job insecurity.
IAB-Discussion Paper 8/2015
Intra-regional economic integration
17 February 2015
Regional clusters have attracted a great deal of attention for more than two decades. The interest comes from two major fields: regional economics and regional economic policy. At the interface between research and policy, the cluster-oriented regional information system CORIS is located. This research project generates information on supply chains, clusters, cluster participants and their embeddedness in two Bavarian regions. It provides a unique data source used for analyses in the present publication.
Offshoring of medium-skill jobs, polarization, and productivity effect
13 February 2015
We examine the effects of endogenous offshoring on cost-efficiency, wages and unemployment in a task-assignment model with skill heterogeneity. Exact conditions for the following insights are derived. The distributional effect of offshoring (high-) low-skill-intensive tasks is similar to (unskilled-) skill-biased technology changes, while offshoring medium-skillintensive tasks induces wage polarization. Offshoring improves cost-efficiency through international task reallocation and puts a downward pressure on all wages through domestic skill-task reallocation. If elasticities of task substitution are low (high), the downward pressure on wages in neighboring skill segments is low (high) with a net effect of higher (lower) wages and employment.
IAB-Discussion Paper 7/2015
Higher wages or lower expectations?
10 February 2015
Labour shortages are a field of research that has been investigated quite thoroughly. The reactions of firms facing problems during the hiring process are, however, largely neglected in empirical literature. Our research will fill this empirical gap and shed light on the question of whether reactions according to the neoclassical theory or to the Reder Hypothesis are more common in reality.
IAB-Discussion Paper 6/2015
The productivity effect of migrants
06 February 2015
Empirical evidence for the US shows that migrants increase the productivity of regions. To explain the impact of migrants on the average firm productivity we construct a general equilibrium model with monopolistic competition a la Melitz (2003). We consider heterogeneous firms with different productivity levels and imperfect substitutability between migrants and natives. This gives rise to wage differences between natives and migrants.
IAB-Discussion Paper 5/2015
What could all the money do?
27 January 2015
Publically sponsored further trainings for the unemployed are an important measure of active labour market policies (ALMP) in Germany. Current discussions within this context also focus on the willingness to participate, which is an important prerequisite for the success of the programs. Financial incentives may foster both participation and successful completion, thereby reducing opportunity costs of these measures. We investigate the question what factors determine the motivation to participate by conducting a CATI survey among around 4.000 unemployed persons from the unemployment insurance system (Social Code III) and the means-tested basic income support system for needy recipients (Social Code II). We use a factorial survey - also known as vignette analysis - in combination with administrative data of the Federal Employment Agency (FEA), the latter providing detailed information about the individual labour market history.
IAB-Discussion Paper 4/2015
Exports, agglomeration and workforce diversity
21 January 2015
In this paper, the authors ask whether German firms (i. e., establishments) benefit from localization and urbanization externalities and face higher export proportions. They also control for a variety of establishment characteristics and workforce diversity. For this purpose, a comprehensive German data set that combines survey data and administrative data is used.
IAB-Discussion Paper 3/2015
Revisiting German labour market reform effects
20 January 2015
There is an ongoing discussion that centres on the German labour market reforms (2003-2005) and the role of these reforms in boosting the German economy. Considering that one of the main objectives of the reforms was to improve the matching process on the labour market, the author uses rich, high-frequency, and recent administrative panel data to present new details regarding the development of job-matching performance before and after the reform years.
IAB-Discussion Paper 2/2015
The effect of hiring subsidies on regular wages
09 January 2015
What happens to the wages of regular workers in establishments subsidized with hiring subsidies? Does hiring programme participants result in windfalls that are distributed among regular workers? Do these reduce their wage demands to avoid being substituted by subsidized workers? Using linked employer-employee data from Germany, I estimate the effects of subsidizing an establishment on regular workers' wages using spell fixed effects regression. I find that hiring subsidy schemes do increase the daily wages of regular workers by up to almost one per cent in the manufacturing sector. These effects are limited to large establishments and abovemedian local unemployment rates.
IAB-Discussion Paper 1/2015
Journal for Labour Market Research 4/2014
07 January 2015
The impact of education on personality
22 December 2014
This paper investigates the short-term effects of a reduction in the length of high school on students’ personality traits using a school reform carried out at the state level in Germany as a quasi-natural experiment. Starting in 2001, academic-track high school (Gymnasium) was reduced from nine to eight years in most of Germany’s federal states, leaving the overall curriculum unchanged. This enabled students to obtain a university entrance qualification (Abitur ) after a total of only 12 rather than 13 years of schooling. We exploit the variation in the length of academic-track high school over time and across states to identify the effect of schooling on students’ Big Five personality traits and on their locus of control.
IAB-Discussion Paper 29/2014
Active labour-market policies in Germany
19 December 2014
Active labour-market policy (ALMP) not only affects the labour-market success of participants. Due to indirect effects, they might also affect the job perspectives of non-participants. Hence, even if ALMP programmes have a positive effect for the participants, this does not mean that ALMP improves the labour-market situation as a whole. Therefore, this paper deals with the question whether ALMP improves the matching-process between job-seekers and vacancies and thus increases the total number of outflows from unemployment into employment at the regional level. To answer this question, we use data for local employment offices of the German Federal Employment Agency for the time period 2006 to 2010 and focus on job-seekers subject to unemployment insurance.
IAB-Discussion Paper 28/2014
New Book: Privacy, Big Data, and the Public Good
19 December 2014
“Privacy, Big Data, and the Public Good: Frameworks for Engagement” is the title of a new book presented in New York in July. The book is edited by Julia Lane, Senior Managing Economist at American Institutes for Research, Victoria Stodden, Assistant Professor of Statistics at Columbia University, Helen Nissenbaum, Professor of Media, Culture and Communication and Computer Science at New York University, and Stefan Bender, Head of the Research Data Centre of the Federal Employment Agency at the IAB. The book provides an accessible summary of the important legal, economic, and statistical thoughts on the many privacy issues associated with the use of big data. It also contains practical suggestions for protecting privacy and confidentiality that can help to guide practitioners.
Further information about the book
Book review (free of charge)
Demography and unemployment in East Germany
01 December 2014
The authors analyze the relation between population aging and the decline of unemployment in East Germany for the years from 1996 to 2012. To this they scrutinize both a direct and an indirect effect of aging on unemployment. The direct effect includes a decomposition of the East German unemployment rate into three components considering changes in the workforce’s age structure, labor market participation, and age-specific unemployment rates. Results show that changes in the age structure of the workforce counteracted unemployment decline since 2005. Spatial panel regressions on the small-scale regional level, however, point towards an indirect effect of aging on unemployment that works through the increasing competition for labor.
IAB-Discussion Paper 26/2014
Differential pricing and private provider performance
27 November 2014
In many countries, employment services are contracted out to private providers. However, there is little evidence on the contract design as well as on the effects of differential pricing on private provider performance. This paper contributes to the literature by presenting detailed information on the contract design and compensation of German private employment service providers in 2009 and 2010.
IAB-Discussion Paper 25/2014
Aspects of wage dynamics in Germany
04 November 2014
Wage inequality in Germany has been rising significantly over the last decades. By now, about one fifth of all employees in Germany are working in the low-wage sector. At the same time, only a fraction of the low-wage workers manage to move up to better-paid jobs. Jens Stephani investigates various research questions concerning the upward wage mobility of low-wage workers which have not been analysed previously: How big are the chances of low-wage workers to stay in higher-paid employment for a longer term after moving up? Which establishments provide above-average wage increases for low-wage workers? How important are personality traits for the chances of low-wage workers moving up? In a separate chapter, Stephani analyses the extent to which the wage levels in establishments that are covered by collective bargaining agreements are still higher than the wage levels in uncovered establishments, despite the decline in unionism in Germany over the last decade.
Trade and unions: Can exporters benefit from collective bargaining?
20 October 2014
Unions are often stigmatized as being a source of inefficiency due to higher collective bargaining outcomes. This is in stark contrast with the descriptive evidence presented in this paper. Larger firms choose to export and are also more likely to adopt collective bargaining. We rationalize those stylized facts using a partial equilibrium model that allows us to evaluate firms' value functions under individual or collective bargaining. Exporting further decreases average production costs for large firms in the collective bargaining regime, allowing them to benefit from additional external economies of scale due to lower bargaining costs. Our findings suggest that the positive correlation between export status and collective bargaining can be explained through size.
IAB-Discussion Paper 24/2014
The implementation of the German Classification of Occupations 2010 in the IAB Job Vacancy Survey
30 September 2014
The IAB-Job Vacancy Survey (IAB-JVS) is the only establishment survey in Germany which contains information about vacancies and new hires on an occupational level. When the new German Classification of Occupations 2010 was introduced, it became necessary to integrate it into the IAB-JVS. This report outlines the implementation of the new classification into the IAB-JVS questionnaire. It was conducted simultaneously with the renewal of the international classification, from ISCO-88 to ISCO-08.
Literature database of IAB
26 September 2014
The literature database of IAB is accessible free-of-charge via the professional social-science portal sowiport. It contains roughly 140,000 instances of labour market-relevant literature, frequently along with an abstract and a link to full text. Here it is not only a question of IAB publications but – since the founding of IAB (the Institute for Employment Research) – also of a general literature database which has been built up and continually updated.
Literature database of IAB
Employment and earnings effects of awarding training vouchers in Germany
17 September 2014
In 2003, Germany moved from a system in which participants in training programs for the unemployed are assigned by caseworkers to an allocation system using vouchers. Based on the rich administrative data for all vouchers and on actual program participation, we provide inverse probability weighting and ordinary least squares estimates of the employment and earnings effects of a voucher award.
IAB-Discussion Paper 23/2014
Determinants of labor shortage - with particular focus on the German environmental sector
29 August 2014
Despite the ongoing discussion on labor shortage in the German economy there is still a lack of empirical analyses of this problem based on adequate econometric methods. The paper explores the determinants of labor shortage in the environmental sector supplying products and services that help to reduce environmental impacts and energy use. Labor shortages occur when the price adjustment mechanism is too slow to balance labor demand and supply. The empirical analysis of labor shortage uses recent data of the establishment panel of the Institute for Employment Research in Nuremberg. A descriptive analysis shows that the environmental sector seems to be over-proportionally affected by labor shortage.
IAB-Discussion Paper 22/2014
On GDP-employment decoupling in Germany
29 August 2014
This paper investigates the time-varying relationship between German output and employment growth, in particular their decoupling in recent years. We estimate a correlated unobserved components model that allows for both persistent and cyclical time variation in the employment impact of GDP as well as an autonomous employment component capturing other factors than real output. As one result, we measure a permanent decline in Verdoorn's coefficient as well as pronounced effects of the autonomous employment component in the recent years. The development of the estimated impact parameters is shown to crucially depend on structural change, but also on labour availability and business expectations.
IAB-Discussion Paper 21/2014
Labour market effects of retraining for the unemployed
27 August 2014
We analyse the impact of retraining for the unemployed on future labour market success, and estimate effects separately for different target occupations. We use German registry data and apply statistical matching methods. The results show that on average, after a period with strong lock-in effects, retraining increases the employment probability of women by more than 20 percentage points. Effects for male participants are somewhat weaker. Although we find differences in the effectiveness of retraining by target occupations, these differences cannot completely explain the observed gender differences. Healthcare occupations, which are the most important target occupations especially of female participants, are among those with the strongest effects.
IAB-Discussion Paper 20/2014
Firm performance and trade with low-income countries
26 August 2014
Do firms in developing countries shift trade towards developed economies as a result of high economic growth? The matched customs-manufacturing firm data used in this study confront this hypothesized link with empirical evidence. Our analysis reveals a rising low-income country trade share around and after China's accession to the World Trade Organization. Based on this stylized fact, we analyze the link between firm characteristics and trade with low-income countries.
IAB-Discussion Paper 19/2014
Job polarization on local labor markets
22 August 2014
The labor markets of most industrialized countries are polarized. This means that employment has grown in jobs at the upper and lower tails of the wage distribution, while employment in the middle part of the distribution has stagnated or declined. However, there exists no measure that allows a quantitative comparison across different labor markets as yet. The author propose a straightforward way to measure the actual magnitude of job polarization. To demonstrate its application, he use this measure to compare polarization across German local labor markets. Job polarization almost exclusively occurs in urban areas where the hypothesis of routine biased technological change is most likely to prevail.
IAB-Discussion Paper 18/2014
Industry space and skill-relatedness of economic activities
21 August 2014
The resilience and growth prospects of a region depend crucially on the extent to which industry-specific human capital can be redeployed across the industries of a regional economy. To this end, the authors present a toolbox to analyse a region’s industrial structure, development prospects and economic resilience. With the help of this toolbox human capital similarities, or skill-relatedness, among industries are highlighted. The core of these analyses is the so-called industry space, a network that connects industries with similar human capital requirements. For the time period 1999 to 2008, a regional comparative analysis of three eastern German automobile regions, namely south-west Saxony (SWS), Eisenach region (EIS) and Leipzig region (LEI), is conducted.
Techniques for asking sensitive questions in labor market surveys
29 July 2014
Standard surveying techniques are usually not suited to collect valid information on the prevalence of undeclared work or receipt of basic income support. Respondents often misreport their behavior and adjust their answer in accordance with the social norm. In the social sciences alternative strategies have been developed, particularly targeted to increase respondent anonymity in the interview situation and thus reduce misreporting on sensitive topics. Antje Kirchner investigates whether these special techniques lead to higher reports of undeclared work and receipt of basic income support. Furthermore, this work presents the Item Sum Technique, a novel questioning technique that shows more promising results compared to direct questioning.
Labour hoarding in Germany
02 July 2014
During the crisis (2008-09) Germany experienced a huge decrease in GDP. Employment, however, remained surprisingly stable. A whole strand of literature has aimed at quantifying the contribution of short-time work to the German labour market miracle. In the course of this literature we estimate the treatment effect of short-time work on employment at establishment level using a dynamic propensity score matching approach. The analysis is based on data from the IAB Establishment Panel combined with administrative data on short-time work establishments from the Federal Employment Agency. Our results do not indicate any treatment effect of short-time work on employment.
IAB-Discussion Paper 17/2014
Forecasting with a mismatch-enhanced labor market matching function
27 June 2014
This paper investigates the role of mismatch between job seekers and job openings for the forecasting performance of a labor market matching function. In theory, higher mismatch lowers matching efficiency which increases the risk that the vacancies cannot be filled within the usual period of time. We investigate whether and to what extent forecasts of German job findings can be improved by a mismatch-enhanced labor market matching function. For this purpose, we construct so-called mismatch indicators that reflect regional, occupational and qualification-related mismatch on a monthly basis. In pseudo out-of-sample tests that account for the nested model environment, we find that forecasting models enhanced by the mismatch indicator significantly outperform their benchmark counterparts for all forecast horizons ranging between one month and a year. This is especially pronounced in the aftermath of the Great Recession where a low level of mismatch improved the possibility of unemployed to find a job again.
IAB-Discussion Paper 16/2014
Effectiveness of data correction rules in process-produced data
17 June 2014
The use of process-produced data plays a large and growing role in empirical labor market research. To address data problems, previous research have developed deductive correction rules that make use of within-person information. The authors test data reliability and the effectiveness of different correction rules for information about educational degrees as reported in German register data.
IAB-Discussion Paper 15/2014
Patterns of resilience during socioeconomic crises among households in Europe (RESCuE)
16 May 2014
In analogy with medical and psychological findings, some parts of the vulnerable population, although experiencing the same living conditions as others, are developing resilience, which in our context means that they perform social, economic and cultural practices and habits which protect them from suffer and harm and support sustainable patterns of coping and adaption. This resilience to socioeconomic crises at household levels is the focus of the project.
Economic failure and the role of plant age and size
12 May 2014
This paper introduces a large-scale administrative panel data set on corporate bankruptcy in Germany that allows for an econometric analysis of involuntary exits where previous studies mixed voluntary and involuntary exits. Approximately 83 percent of all bankruptcies occur in plants with no more than 10 employees, and 61 percent of all bankrupt plants are not older than 5 years. The descriptive statistics and regression analysis indicate substantial negative age dependence with respect to bankruptcy risk but confirm negative size dependence for mature plants, only. Our results corroborate hypotheses stressing increasing capabilities and positional advantage, both predicting negative age dependence with respect to bankruptcy risk due to productivity improvements. The results are not consistent with the theories explaining age dependence via imprinting or structural inertia.
IAB-Discussion Paper 13/2014
The hidden winners of renewable energy promotion
07 May 2014
In light of Germany´s transition approaches towards a sustainable energy system this paper examines differences of employment structure and wage differentials between renewable energy establishments and their sector peers. To do so, we have developed a novel data set by linking company-level information from the German Renewable Energy Federation with establishment-level data of the IAB Establishment History Panel. According to our descriptive evidence, there are significant differences in wages and in several other characteristics. Looking at the top-four renewable energy sectors, our estimates show that human capital and other establishment- level characteristics mostly explain the wage differential among manufacturers and energy providers. However, we find a persistent 'renewable energy wage premium' of more than ten percent in the construction installation activities and the architectural and engineering services. We interpret this premium as a positive indirect effect of the promotion of renewable energies for the benefit of employees in renewable energy establishments within these two sectors.
IAB-Discussion Paper 12/2014
Efficiency in public input provision in two asymmetric jurisdictions with imperfect labour markets
22 April 2014
This paper examines efficiency in public input provision in two large jurisdictions with imperfect labour markets. It analyses how equilibrium capital tax rates and public input provision levels differ between asymmetric jurisdictions that can strategically influence the interest rate on the common capital market in an international tax competition setting. In contrast to the scenario assuming competitive labour markets, the non-cooperative equilibrium is inefficient also when governments have capital and head taxes at disposal. As a source of both the distortion in the capital allocation between jurisdictions and the inefficiency in public input provision, which can be determined in at least one of the jurisdictions, we identify the governments' incentives to decrease unemployment, and a pecuniary externality [De- Pater, J., Myers, G., 1994. Strategic capital tax competition: a pecuniary externality and a corrective device. Journal of Urban Economics 36, 66-78.] in both jurisdictions. Efficiency in public input provision can be restored, however, if the set of fiscal instruments available for regional policy makers is extended by a labour tax.
IAB-Discussion Paper 11/2014
Sorting within and across establishments
17 April 2014
Using new and unique linked employer-employee data from Germany, I examine the extent to which immigrants sort into worse-paying establishments and worse job positions within establishments. The results demonstrate that recent immigrants are particularly likely to work at low-paying workplaces. Similarly, when examining job positions within establishments, I find that immigrants are employed in lower hierarchical positions. Both the non-random sorting across establishments and the hierarchical sorting within establishments explain much of the immigrant-native wage differential. Policy measures designed to address the wage differential should therefore address immigrants' access to well-paying workplaces and job positions.
IAB-Discussion Paper 10/2014
Curing the sick man: The German labour market on the way to good health?
15 April 2014
In 1999, “The Economist” referred to Germany with the meaningful headline “The sick man of the euro”. 15 years later, the world is talking about the “German Labour Market Miracle”. Ulrich Walwei, deputy director of the IAB, describes Germany’s transformation and discusses the remaining weaknesses of the German labour market.
On the efficiency properties of the Roy‘s model under asymmetric information
24 March 2014
We consider Roy's economies with perfectly competitive labor markets and asymmetric information. Firms choose their investments in physical capital before observing the characteristics of the labor markets they will face. We provide conditions under which equilibrium allocations are constrained Pareto efficient, i.e., such that it is impossible to improve upon the equilibrium allocation by changing agents' investments and letting the other endogenous variables adjust to restore market clearing. We also provide a robust example of a class of economies where these conditions fail and where equilibria are characterized by overinvestments in high skills. Finally, we discuss some implications of our main results for the optimal taxation literature.
IAB-Discussion Paper 8/2014
Success and failure in the operational recruitment process
13 March 2014
Following microeconomic theory, every vacancy should be filled by appropriate manpower after a certain time. However, from an empirical point of view it is evident that vacancies remain unfilled as establishments cancel their search for a suitable applicant. The German Job Vacancy Survey (JVS) is a representative survey of job offers for the entire German economy and provides information about the search and matching processes for both the establishments' most recent hires and for failures in the recruitment processes. The analysis is based on a binary explanatory variable, resulting from the interaction of individual successful and unsuccessful search processes (cancellation probability). Our results show that with increasing recruitment duration, the number of search cancellations becomes more likely. Moreover, the results indicate that the probability of a search cancellation is strongly linked to the characteristics that an applicant must provide and to the way the search is organised.
IAB-Discussion Paper 7/2014
Active labour market programmes for women with a partner
04 March 2014
A major unemployment and welfare benefit reform took place in Germany in 2005. One objective of this reform was to more strongly encourage an adult worker model of the family, with an emphasis on activating the formerly inactive. The authors' hypothesis is, however, that assignments to activation programmes, such as training or workfare, will in practice still tend to replicate patterns for the division of labour in the household that couples have become accustomed to.
IAB-Discussion Paper 6/2014
Journal for Labour Market Research 1-2/2014
04 March 2014
Revisiting the matching function
28 February 2014
Many labor market models use both idiosyncratic productivity and a vacancy free entry condition. This paper shows that these two features combined generate an equilibrium comovement between matches on the one hand and unemployment and vacancies on the other hand, which is observationally equivalent to a constant returns Cobb-Douglas function commonly used to model match formation. The authors use German administrative labor market data to show that the matching function correlation solely based on idiosyncratic productivity and free entry is very close to the empirical matching function.
IAB-Discussion Paper 5/2014
Interacting product and labor market regulation and the impact of immigration on native wages
26 February 2014
Does interacting product and labor market regulation alter the impact of immigration on wages of competing native workers? Focusing on the large, sudden and unanticipated wave of migration from East to West Germany after German reunification and allowing for endogenous immigration, we compare native wage reactions across different segments of the West German labor market: one segment without product and labor market regulation, to which standard immigration models best apply, one segment in which product and labor market regulation interact, and one segment covering intermediate groups of workers. We find that the wages of competing native West Germans respond negatively to the large influx of similar East German workers in the segment with almost free firm entry into product markets and weak worker influence on the decision-making of firms. Competing native workers are insulated from such pressure if firm entry regulation interacts with labor market institutions, implying a strong influence of workers on the decision-making of profit-making firms.
IAB-Discussion Paper 4/2014
Regional determinants of German FDI in the Czech Republic
25 February 2014
The attractiveness for the location of multinational firms is seen as a crucial issue for the development and prosperity of regions. This article focuses on a two-country relationship and deals with the regional distribution of German multinational firms and their affiliates in the Czech Republic. A new dataset established by the IAB covers information on the basic population of cross-border foreign direct investment (FDI) projects, thereby exceeding the number of observations in previously used databases by far. On the basis of 3,894 FDI projects the regional determinants of German cross-border investments in the Czech Republic are analysed for both the home and the host country. Alternative specifications of the gravity model are used in order to investigate the regional distribution of common investment projects that are calculated as a combination of a headquarters in a German spatial planning region and an affiliate in a Czech NUTS 3 region. Concerning the explanatory variables a distinction is made between three groups of factors: first, market size and agglomeration features of the regions; second, attributes representing the distance between the headquarters in Germany and the affiliates in the Czech Republic; and third, regional labour market characteristics. While the findings are generally in line with theoretical expectations, differences emerge between manufacturing FDI and services FDI.
IAB-Discussion Paper 3/2014
Beat the heap - an imputation strategy for valid inferences from rounded income data
03 February 2014
Questions on income in surveys are prone to two sources of errors that can cause bias if not addressed adequately at the analysis stage. On the one hand, income is considered sensitive information and response rates on income questions generally tend to be lower than response rates for other non-sensitive questions. On the other hand respondents usually don’t remember their exact income and thus tend to provide a rounded estimate. The negative effects of item nonresponse are well studied and most statistical agencies have developed sophisticated imputation methods to correct for this potential source of bias. However, to our knowledge the effects of rounding are hardly ever considered in practice, despite the fact that several studies have found strong evidence that most of the respondents round their reported income values.
IAB-Discussion Paper 2/2014
Your very private job agency
13 January 2014
This paper analyzes job referral effects that are based on residential location. We use georeferenced record data for the entire working population (liable to social security) and the corresponding establishments in the Rhine-Ruhr metropolitan area, which is Germany's largest (and EU's second largest) metropolitan area. We estimate the propensity of two persons to work at the same place when residing in the same neighborhood (reported with an accuracy of 500m×500m grid cells), and compare the effect to people living in adjacent neighborhoods. We find a significant increase in the probability of working together when living in the same neighborhood, which is stable across various specifications. We differentiate these referral effects for socioeconomic groups and find especially strong effects for migrant groups from former guestworker countries and new EU countries. Further, we are able to investigate a number of issues in order to deepen the insight on actual job referrals: distinguishing between the effects on working in the same neighborhood and working in the same establishment - probably the more accurate measure for job referrals - shows that the latter yield overall smaller effects. Further, we find that clusters in employment although having a significant positive effect play only a minor role for the magnitude of the referral effect. When we exclude short distance commuters, we find the same probabilities of working together, which reinforces our interpretation of this probability as a network effect.
IAB-Discussion Paper 1/2024
Journal for Labour Market Research 4/2013: Special Issue PASS
20 December 2013
On government-subsidized training programs for older workers
19 December 2013
We analyze the impact of the GermanWeGebAU programs, which are government-subsidized training measures for employed workers over 45 years old. We apply a dynamic matching approach similar to Crépon et al. (2009) and exploit novel information contained in rich German registry data. We focus on the effects on survival probability in original employment and estimate the effects separately by gender, age, job status, and program duration. We find that WeGebAU training improves the probability of remaining in paid employment by 1.0 to 2.5 percentage points in the two-year period following treatment. The effect is more pronounced for part-time workers and longer-duration program participants. Our analysis suggests that postponed labor market withdrawal is the main driver of the positive effects and that there is selection into treatment at the firm level.
IAB-Discussion Paper 21/2013
The impact of low-skilled immigration on female labour supply
19 November 2013
This paper contributes to the literature on the impact of immigrants on native female labour supply. By segmenting the market by educational levels, the authors are able to investigate which nativeborn women are more affected by an increase of low-skilled immigrants working in the household service sector. They present a model of individual choice with home production, using an harmonized dataset (CNEF) and test its main predictions.
IAB-Discussion Paper 20/2013
Recruiting abroad: the role of foreign affinity and labour market scarcity
15 November 2013
The author study the recruiting behaviour of German establishments with regard to the use of foreign labour markets. The results indicate that shortages are functional and foster the use of foreign labour markets, but the large effect of foreign affinity also reveals that the potential of immigrant workers is used selectively.
IAB-Discussion Paper 19/2013
The cyclicality of worker flows: Evidence from Germany
05 November 2013
The development of unemployment and employment is strongly determined by labor market flows. This dissertation analyzes worker flows, i.e. job findings and separations, over the business cycle. The analysis uses process-generated micro data provided by the Institute for Employment Research (IAB), which allow gaining comprehensive insights into labor market dynamics in Germany.
Journal for Labour Market Research 3/2013 ( Volume 46)
28 October 2013
Constructing a new leading indicator for unemployment from a survey among German employment agencies
28 October 2013
The paper investigates the predictive power of a new survey implemented by the Federal Employment Agency (FEA) for forecasting German unemployment in the short run. Every month, the CEOs of the FEA's regional agencies are asked about their expectations of future labor market developments. We generate an aggregate unemployment leading indicator that exploits serial correlation in response behavior through identifying and adjusting temporarily unreliable predictions. We use out-of-sample tests suitable in nested model environments to compare forecasting performance of models including the new indicator to that of purely autoregressive benchmarks. For all investigated forecast horizons (1, 2, 3 and 6 months), test results show that models enhanced by the new leading indicator significantly outperform their benchmark counterparts. To compare our indicator to potential competitors we employ the model confidence set. Results reveal that models including the new indicator perform very well.
IAB-Discussion Paper 17/2013
The effectiveness of sequences of One-Euro-Jobs
10 October 2013
Many studies have analysed the effectiveness of single active labour market programmes (ALMPs) for welfare recipients in different countries. As empirical evidence reveals that welfare recipients in Germany often participate in multiple programmes, I evaluate the sequential participation of unemployment benefit II (UB-II)-recipients in ALMPs in Germany. My study uses comprehensive, administrative data to control for dynamic selection that arises in the evaluation of sequences. Using a dynamic matching approach and an inflow sample of UB-II-recipients, I analyse the effects of sequences of One-Euro-Jobs and/or UB II-receipt on labour market outcomes.
IAB-Discussion Paper 16/2013
Wage posting or wage bargaining?
20 September 2013
Using a representative establishment dataset, this paper is the first to analyze the incidence of wage posting and wage bargaining in the matching process from the employer’s side. We show that both modes of wage determination coexist in the German labor market, with about two-thirds of hirings being characterized by wage posting. Wage posting dominates in the public sector, in larger firms, in firms covered by collective agreements, and in part-time and fixed-term contracts. Jobseekers who are unemployed, out of the labor force or just finished their apprenticeship are also less likely to get a chance of negotiating. Wage bargaining
is more likely for more-educated applicants and in jobs with special requirements as well as in tight regional labor markets.
IAB-Discussion Paper 15/2013
Labour market forecasting: Is disaggregation useful?
18 September 2013
Using the example of short-term forecasts for German employment figures, the article at hand examines the question whether the use of disaggregated information increases the forecast accuracy of the aggregate. For this purpose, the out-ofsample forecasts for the aggregated employment forecast are compared to and contrasted with forecasts based on a vector-autoregressive model, which includes not only the aggregate but also the numbers of gainfully employed people at the industry level. The Clark/West test is used in the model comparison. It becomes evident that disaggregation significantly improves the employment forecast. Moreover, fluctuation-window tests help identify the phases during which disaggregation increases forecast accuracy to the strongest extent.
IAB-Discussion Paper 14/2013
Migration, unemployment, and skill downgrading
13 September 2013
This paper analyzes the impact of the skill composition of migration flows on the host country’s labor market in a specific factors two-sector model with heterogeneous labor (low-, medium-, and highly-skilled) and price- and wage-setting behavior. The low- and medium-skilled labor markets are characterized by frictions due to wage bargaining. Moreover, we assume skill downgrading of unemployed medium-skilled workers into low-skilled labor supply. Endogenous benefits create an interdependency between the two bargaining processes.
IAB-Discussion Paper 13/2013
Unemployment benefit II, unemployment and health
13 September 2013
A multitude of studies has established a negative relationship between unemployment and health. With the "Hartz-reforms", unemployment benefit II was introduced in 2005. Whether unemployment benefit II receipt has an impact, additional to unemployment, on health, is investigated. For this study data of the panel study "Labour market and social security" is used. The sample consists out of 14.282 respondents aged 18 to 65, who participated up to five years from 2006 to 2011. Measures of subjective health by social status were analyzed using Fixed Effect panel models.
IAB-Discussion Paper 12/2013
New insights into the development of regional unemployment disparities
26 August 2013
Large regional unemployment disparities are a common feature of the labor market in many countries. This study deals with the question whether regional unemployment disparities in western Germany widen, become narrower or remain constant over time. It examines the hypothesis of convergence for regional unemployment rates of western German Federal States and the time period 1968 to 2009 following different concepts of convergence.
IAB-Discussion Paper 11/2013
22 August 2013
This paper provides detailed empirical evidence on the scope of mismatch in Germany in the past decade, using a comprehensive administrative data set that allows for disaggregation at the levels of industry, occupation and region. The results provide no evidence that the Hartz reforms have substantially reduced mismatch, in line with the fact that reallocation across occupations appears not to have been eased.
IAB-Discussion Paper 10/2013
The evolution of regional labor market disparities
15 August 2013
This book deals with the question of whether regional disparities in labor market performance widen, become narrower or remain constant over time. It examines the hypothesis of convergence for the unemployment rates of the German Federal States and employment rates of western German regional planning units.
Capital mobility, imperfect labour markets, and the provision of public goods
15 August 2013
This paper examines equilibrium tax rates and provision levels of public goods in an international tax competition setting with imperfect labour markets.
IAB-Discussion Paper 9/2013
A sketch of youth unemployment in selected countries
08 August 2013
In this paper the authors of the International Labour Market Forecasting Network (a cooperation of several researchers related to PES) briefly describe the youth unemployment in Denmark, Estonia, Finland, Germany, Norway and Sweden.
Current report: A sketch of youth unemployment in selected countries
A new panel dataset on international migration by gender and education
06 August 2013
Using Census and Population Registers data from 20 OECD destination countries, the IAB has released a new dataset featuring the number of immigrants by gender, educational level, country of origin and destination, for the years 1980-2010.
The data collection has been carried out within the framework of the European project TEMPO (TEmporary Migration, integration and the role of POlicies), with the aim of providing researchers with a new and up to date tool for the study of the causes and consequences of international migration, and of the out-migration of the high-skill population (the so-called "Brain Drain").
IAB brain-drain data
Skilled labour requirements in firms
30 July 2013
Establishments in the manufacturing sector that export goods usually pay their employees considerably more than those that do not. IAB researchers have followed up the reasons for this in the current issue of the IAB-Forum, entitled "Vantage point. The establishment-level perspective of the labour market". The initially surprising findings show that the establishment-level perspective opens up important and sometimes unexpected insights into the labour market. To make this view of the labour market useful for research as well, the IAB Establishment Panel was launched in 1993. The results of the annual survey are of great advantage to in-house practice, political decision-making and also to the operative activities of the Federal Employment Agency – for instance when solutions are being sought on how to deal with shortages of skilled workers, aging workforces, the compatibility of family and career, framework conditions for employee participation, or the in-house use of integration subsidies.
The IAB-Forum is published only in German. Some of the selected articles of this edition have been translated into English.
Skilled labour requirements in firms: Shortages are emerging in some sectors and regions
Location choice: Why German firms invest in the Czech Republic
Policy for the labour market: What matters
10 July 2013
In a paper for the "Ökonomenstimme", Enzo Weber discusses strategies for future labour market policy. The topics are among others minijobs, temporary agency work and the minimum wage.
Policy for the labour market: What matters
The re-entry of mothers in Germany into employment after family-related interruptions
09 July 2013
It is still difficult for mothers in Germany to reconcile family life with employment. This becomes particularly apparent when mothers attempt to re-enter the labour market. Partly this varies very strongly according to level of education; partly legal regulations on parental leave play a decisive role. In addition, women in the Western part of Germany interrupt their employment for a longer time than women from the Eastern part of Germany - even twenty years after reunification. In the meantime, this appears to be more a result of different institutional regulations rather than differing socialisation. Finally, the re-entry of mothers into the labour market after interrupting their employment to have and look after children also seems to depend on the characteristics of the jobs offered. Here it becomes apparent that, along with pay, non-monetary characteristics also play an important role - especially those affecting one's personal time budget.
The ReLOC project
27 June 2013
Economic integration typically goes along with a disintegration of production through outsourcing and offshoring. The consequences of foreign direct investments (FDI) especially for the labour market are an issue of ongoing debate. The countries of origin fear job losses. However, a range of models and studies show that the productivity gains lead to job growth at the domestic plants.
The method report presents the questions which arose through a cross-border company survey and the solutions found. The process of the implementation is described, focussing on the creation of the database as well as on the questionnaire development.
"Gertrude M. Cox Award" for Frauke Kreuter
26 June 2013
The Washington Statistical Society (WSS) and Research Triangle Park (RTI) International have honored Frauke Kreuter, Ph.D., as this year’s recipient of the 2013 Gertrude M. Cox Award for her contributions in the area of survey methodology.
Trade and qualifikation
06 June 2013
Foreign markets determine success and failure of those industries that have become reliant on foreign demand, impair the demand for employment and invoke changes in occupational fields and qualification requirements. This paper aims to disclose the direct and indirect influence of major trading partners on Germany's production, employment, and qualification needs. It projects the effects by using the dynamic macro-econometric input-output model INFORGE. Industrialised economies are the most important determinants for employment in the manufacturing industries. Business-related services are highly indirectly affected. The growth impact of industrialised nations is declining while BRICS nations are gaining momentum. A shift towards higher qualification needs can be observed.
IAB-Discussion Paper 7/2013
The scars of youth
27 May 2013
Does early-career unemployment cause future unemployment? The autors answer this question with German administrative matched employer-employee data that track more than 800,000 individuals over 24 years. Using a censored quantile instrumental variable estimator and instrumenting early-career unemployment with local labor market conditions at labor market entry and firm-specific labor demand shocks, they find significant and longlasting scarring effects. At the median, an additional day of unemployment during the first eight years on the labor market increases unemployment in the following 16 years by 0.96 days. Effects are even stronger in the right tail of the unemployment distribution. Likely due to unobserved heterogeneity in returns to search, they are also understated by non-IV estimates.
IAB-Discussion Paper 6/2013
Subsidies for substitutes?
22 May 2013
This paper estimates substitution effects of the German active labour market programme "JobPerspektive", a wage subsidy for hard-to-place welfare recipients. Results provide little evidence for widespread substitution of regular workers due to receiving this particular subsidy; in fact, regular employment is somewhat increased in West Germany as a result of subsidization.
IAB-Discussion Paper 5/2013
Does it matter where you work?
15 May 2013
Using rich German linked employer-employee data and endogenous switching regression models, this paper shows that large firms and firms with a high export share or a low proportion of fixed-term workers provide higher wage growth for low-wage workers. While having many low-paid co-workers dampens the wage growth of both low-wage workers and higher-wage workers, there are also employers who provide higher wage growth only for higher-wage workers.
IAB-Discussion Paper 4/2013
Effects of participating in skill training and workfare on employment entries for lone mothers receiving means-tested benefits in Germany
18 April 2013
This paper investigates employment effects of further vocational training, short classroom training, as well as One-Euro-Jobs for lone mothers receiving Unemployment Benefit II (UB II) in Germany. Lone mothers receiving UB II participate in these active labor market programs at very high rates. As soon as their youngest child is aged three or above, their program entry rates are as high as for childless singles. This paper examines whether lone mothers can actually profit from partici-pating in these programs, given low levels of childcare provision.
IAB-Discussion Paper 3/2013
Motivated underreporting in screening interviews
08 April 2013
Most surveys begin with questions designed to determine whether the sample household includes any members of the survey's target population. However, the screening questions can miss eligible household members. The underreporting of eligible household members may reflect interviewer motivation, respondent motivation, or some combination of the two. The authors did an experiment to test several hypotheses about this phenomenon, which they call motivated underreporting.
Evaluating the labor-market effects of compulsory military service
08 April 2013
The authors identify the causal effect of compulsory military service on conscripts' subsequent labor-market outcomes by exploiting the regression-discontinuity design of the military draft in Germany during the 1950s.
(When) Is job-finding via personal contacts a meaningful concept for social network analysis?
03 April 2013
Chua (2011) argues that in a meritocratic context, institutions restrict the usefulness of social networks in exerting influence on job seekers' earnings. Regressing job-finding via personal contacts on earnings, he finds negative effects of influence via personal contacts, especially for the well-educated and individuals working in the state sector.
Feature: Flexible forms of employment
03 April 2013
In recent decades, economic policy makers across Europe have sought to increase labour market flexibility by promoting the use of temporary employment. The articles in this Feature provide new results on how fixed-term and agency work contracts affect firm productivity and how the segments of two-tier labour markets interact.
Patterns of unemployment dynamics in Germany
02 April 2013
This paper studies the patterns of unemployment dynamics in Germany. To provide a deeper insight into the margins of unemployment adjustment, we employ a structural VAR model and identify the effects of a technology shock as well as two policy shocks. The authors find that the worker reallocation process varies substantially with the identified shocks.
IAB-Discussion Paper 2/2013
Does downward nominal wage rigidity dampen wage increases?
25 March 2013
Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). The authors analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a dataset comprising more than 169 million wage changes.
The effects of extended unemployment insurance over the business cycle
25 March 2013
One goal of extending the duration of unemployment insurance (UI) in recessions is to increase UI coverage in the face of longer unemployment spells. Although it is a common concern that such extensions may themselves raise nonemployment durations, it is not known how recessions would affect the magnitude of this moral hazard. To obtain causal estimates of the differential effects of UI in booms and recessions, this article exploits the fact that in Germany, potential UI benefit duration is a function of exact age which is itself invariant over the business cycle.
Journal for Labour Market Research 1/2013 ( Volume 46)
25 March 2013
A new look at the discouragement and the added worker hypotheses
13 February 2013
Using German data this study applies an unobserved-components approach to disentangle the unemployment rate into a (stochastic) trend and a cyclical part and to estimate the influence of these components on labor participation. The persistent trend component of unemployment, which triggers permanent reactions of the workers, is likely connected to a structural discouragement effect. The cyclical component, which reflects more fluctuant changes, can be linked to a shorter-term added worker effect. By splitting up the participation effect of changes in the unemployment rate our analysis differs profoundly from previous studies that present the net of both or only a single effect. For the total working population both a discouragement and an added worker effect were identified. In detailed analyses we find that the former was relevant for older workers, whereas the latter especially concerns prime aged and younger females. As many OECD countries are facing an ageing population as well as rising importance of women in the labor market, these age- and gender-specific results might be of particular interest.
IAB-Discussion Paper 1/2013
Comparing European Metropolitan Regions in Germany: Wages diverge conspicuously
17 December 2012
The wage level as an indicator of a region‘s economic strength shows strong distinctions between the eleven German Metropolitan Regions, along with a clear west-east gradient. Employees in the Metropolitan Regions Stuttgart, Munich and Frankfurt/Rhine-Main earn the highest incomes, according to a study in the current IAB-Forum by Anja Burghardt, Daniela Hochfellner and Marion König. The IAB-Forum is published only in German. Selected articles of this edition have been translated into English.
Comparing European Metropolitan Regions in Germany: Wages diverge conspicuously
More competition for bright minds
17 December 2012
Qualified professionals are the fuel of a knowledge-intensive economy, the fuel that gives Germany the necessary thrust in international competition. But more than a few people are worried that qualified professionals could soon become scarce. That is why the current issue of the IAB-Forum has chosen to examine this much discussed topic of "ensuring the availability of qualified professionals" (Fachkräftesicherung) from various different angles. The IAB-Forum is published only in German. Some of the selected articles of this edition have been translated into English.
The dynamics of the requirement for qualified professionals. In the long run, the forces of the market will counteract labour shortages (Stephan Brunow, Ulrich Möller, Jens Stegmaier)
More competition for bright minds. How to pilot qualified professionals into companies (Ulrich Walwei)
Examples from within companies. How employers look for and retain skilled workers (Oliver Ludewig, Ekaterina Kouli)
Decomposing Beveridge curve dynamics by correlated unobserved components
10 December 2012
Between 1979 and 2009, the German labour market moved along a Beveridge curve with changing slope that usually shifted outwards but once inwards. We em-ploy an unobserved components model to simultaneously disentangle permanent and transitory components of matching efficiency and separation rate (shifting pa-rameters) as well as unemployment and vacancies. Cointegration and identification are especially addressed. We find a steady overlay of structural and transitory shocks for both shifts of and movements along the curve. Thereby, the separation rate is more important than matching efficiency and the two are negatively corre-lated. Labour market tightness is mostly driven by stochastic trends, which leads to permanent rotations of the job creation curve, i. e. movements along the Beveridge curve.
IAB-Discussion Paper 28/2012
Job matching across occupational labour markets
03 December 2012
This paper refers to an analysis of matching processes in occupational labour markets in terms of classes of jobs that share extensive commonalities in their required qualifications and tasks. To date, all studies in this field have been based on the assumption of separate occupational labour markets. This assumption suggests that job search and matching processes only transpire within distinct occupational labour markets and that no occupational changes occur. I present theoretical and empirical arguments that undermine the validity of this assumption. Moreover, I construct an "occupational" topology based on information about the ways in which occupational groups may be seen as alternatives in searches for jobs or workers respectively. I then use pooled ordinary least squares, fixed effects, and pooled mean-group models that consider cross-sectional dependency lags for regressors to test the hypothesis that job search and matching occur across occupational labour markets. In particular, I find significant and positive matching elasticities with respect to the averaged numbers of unemployed workers and vacancies in similar occupational groups; these results clearly support my hypothesis. Furthermore, there are indications that returns to scale that are derived from the results of the pooled mean-group model are constant. The findings of this study strongly suggest the use of an augmented matching function that considers job and worker searches across occupational labour markets.
IAB-Discussion Paper 27/2012
2012 Gerhard Fürst Prize for Dr Stephanie Eckman
27 November 2012
The Award Presentation for outstanding scientific work took place during the 21st Scientific Colloquium on the subject of "Statistics in the Light of the European Bank and Debt Crisis" that was hosted jointly by the Federal Statistical Office and the German Statistical Society on 22 and 23 November 2012 in Wiesbaden.
Dr Stephanie Eckman received the 2012 Advancement Award in the category "Dissertations" for her work on the topic of "Errors in Housing Unit Frames and Their Effects on Survey Estimates". The dissertation was written under the supervision of Professor Frauke Kreuter of the University of Maryland.
Prize winners 2012
Workplace heterogeneity and the rise of West German wage inequality
15 November 2012
The authors study the role of establishment-specific wage premiums in generating recent increases in West German wage inequality. Models with additive fixed effects for workers and establishments are fit in four distinct time intervals spanning the period 1985-2009.
IAB-Discussion Paper 26/2012
The formation of experts' expectations on labour markets
29 October 2012
Expectations regarding the economic development might be correlated due to various reasons: because individuals use the same public information and similar evaluation methods, and because of social learning or herding amongst peers. We analyse to what extent expectations are driven by herd behaviour, and if it contributes to make expectations more realistic. In a novel survey the CEOs of the local departments of the German Federal Employment Agency report their expectations on unemployment in the short run. In this data we can discriminate between close and less-close peers to overcome the reflection problem and to quantitatively assess answers regarding the initial questions. We find strong evidence for herding in expectation formation. The size of effect is robust across various specifications and remains even when controlling for forecasts from experts external to the survey. The social multiplier approximately doubles the effect of information (signals) included in the model. Compared to counterfactual expectations without herding constructed from the estimates, herding seems to improve the accuracy of the expectations.
IAB-Discussion Paper 25/2012
Skill-biased labor market reforms and international competitiveness
10 October 2012
This paper proposes a multi-industry trade model with integrated capital and goods markets. Labor market imperfections in line with Mortensen and Pissarides (1994) give rise to unemployment and a channel for the government to influence markets through institutional changes. Labor market interventions feedback into the product market through changes in a country's competitiveness. Moreover, the distinction between high- and low-skill workers facilitates the analysis of skill-biased institutional changes that have stronger impact on certain skill groups. The comparative static exercise in this paper shows that high-skilled benefit from low-skill biased labor market reforms through higher wages. Lower labor costs reduce unemployment of the low-skilled and increases the reforming country's competitiveness. One-sided labor market interventions have feedback effects through adjustments at the extensive margin, which affect all workers at home and abroad irrespective of their level of skill. Governments in the non-reforming countries may react to this loss in competitiveness by initiating cooperative labor market reforms instead.
IAB-Discussion Paper 24/2012
Human capital mobility and convergence
24 September 2012
Since the fall of the iron curtain in 1989, the migration deficit of the Eastern part of Germany has accumulated to 1.8 million people, which is over 10 percent of its initial population. Depending on their human capital endowment, these migrants might either - in the case of low-skilled migration - accelerate or - in high-skilled case - impede convergence. Due to the availability of detailed data on regional human capital, migration and productivity growth, we are able to test how geographic mobility affects convergence via the human capital selectivity of migration. With regard to the endogeneity of the migration flows and human capital, we apply a dynamic panel data model within the framework of ß-convergence and account for spatial dependence. The regressions indicate a positive, robust, but modest effect of a migration surplus on regional productivity growth. After controlling for human capital, the effect of migration decreases; this decrease indicates that skill selectivity is one way that migration impacts growth.
IAB-Discussion Paper 23/2012
Do reservation wages react to regional unemployment?
21 September 2012
Reservation wages indicate the wage threshold for which individual workers are inclined to supply their working capacity. In important theoretical approaches it is assumed that this threshold depends on the unemployment rate. If this is true, the variation of reservation wages might be an important force behind the regional 'wage curve', which has been estimated in many empirical studies. Up to now, the connection of regional unemployment with reservation wages has not been tested, since research possibilities depend on survey data which were not available. With the 'Labour Market and Social Security' study (PASS), a new large panel survey in Germany, information on regional reservation wages is available. The empirical analysis with this data opens up the 'black box' of the wage generation process and delivers insights about its determining factors. The analysis is based on job matching and efficiency wage theory which are used to derive a relationship between unemployment and reservation wages.
IAB-Discussion Paper 22/2012
Do literacy and numeracy pay off?
20 September 2012
Is there a reward for basic skills in the German labor market? To answer this question, we examine the relationship between literacy, numeracy and monthly gross earnings of full-time employed workers. We use data from the ALWA survey, augmented by test scores on basic cognitive skills as well as administrative earnings data. Our results indicate that earnings are positively related to both types of skills. There furthermore is no evidence for non-linearity in this relationship and only little heterogeneity when differentiating by sub-groups.
IAB-Discussion Paper 21/2012
Profiles of local growth and industrial change
17 September 2012
In this paper we take a detailed look at the sectoral anatomy of regional growth in German regions over the period 1978-2008. In the aggregate, the German economy is characterized by a secular decline of the manufacturing sector and a rise of the modern service economy. This trend of structural change (Petty's law) by no means occurs uniformly across space, however. Some regions exhibit this trend even at an accelerated pace, while other regions develop their local economic structures against the trend and expand their manufacturing bases. We first develop a novel empirical approach that allows us to categorize all German regions into one out of three groups with 'pro-trend', 'anti-trend' or 'featureless' regional growth. Afterwards we show that the differential exposure to international trade is an important cause of the divergent patterns of local industrial change.
IAB-Discussion Paper 20/2012
Employers' selection behavior during short-time work
17 August 2012
During the recession of 2008-09 Germany experienced a huge decrease in GDP. Employment, however, remained surprisingly stable. The so-called German labor market miracle is often ascribed to the intensive usage of short-time work. Despite the resurgence of this instrument, little is known about the employees affected by it. This paper analyzes whether employers select certain individuals for short-time work, where special focus is given on the effect of human capital.
IAB-Discussion Paper 18/2012