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