Reassessing the Wage Penalty for Temps in Germany

As a consequence of the rapid growth of temporary agency employment in Germany, the debate on the poor working conditions of temps, specifically their remuneration, has intensified recently. Using administrative data, the paper shows that the wage gap for German temp workers is rather large and varies between occupation and region. But temps already suffer from a marked wage decline before entering the temporary help sector. Nevertheless, temporary agency employment does not leave a long lasting scar. Two years after leaving the sector, temps no longer suffer from a wage penalty. A recent change in the law set a high incentive for temporary help agencies to pay their workers according to a sectoral collective agreement. Surprisingly, the unionization of the sector could not bring the widening wage gap to a halt.temporary agency employment, wage differential, earnings, Germany, reform

Interconnection and Competition Among Asymmetric Networks in the Internet Backbone Market

We examine the interrelation between interconnection and competition in the internet backbone market.Networks asymmetric in size choose among different interconnection regimes and compete for end-users.We show that a direct interconnection regime, Peering, softens competition compared to indirect interconnection since asymmetries become less influential when networks peer.If interconnection fees are paid, the smaller network pays the larger one. Sufficiently symmetric networks enter a Peering agreement while others use an intermediary network for exchanging traffic.This is in line with considerations of a non-US policy maker.In contrast, US policy makers prefer Peerings among relatively asymmetric networks.Internet Backbone;Endogenous Network Interconnection;Asymmetric Networks;Two-Way Access Pricing

Substitution and crowding-out effects of active labour market policy

The search model contains two matching technologies, the public employment service (PES) with its type-specific registers for workers and vacancies, and the search market where firms advertise vacancies and unemployed who have not been placed by the PES search for jobs. The placement activity of the PES increases the bargained wages, reduces active job search, decreases the number of advertised vacancies, but - compared with the laissez- faire regime - increases employment and per capita consumption. Of all the instruments of ALMP, the probabilities of a match, the portion of unskilled not interested in a job, and the hiring subsidies generate crowding-out effects. The productivity of the unskilled, (re-employment)bonuses, penalties for violations of the search rule, and the stringency of the search rule cause crowdingin effects. Assistance for problem groups is less effective than promoting active job search. -- Das Suchmodel umfasst zwei Matching-Technologien, die des PES mit typspezifischen Registern für Arbeitslose und Vakanzen und die des Suchmarkts, wo Firmen Vakanzen annoncieren und nicht Vermittelte nach Stellen suchen. Die Vermittlungstätigkeit des PES erhöht die Lohnkosten, reduziert die aktive Suche und die annoncierten Vakanzen, senkt im Vergleich zum Laissez-faire Regime die Arbeitslosenquote und steigert den Pro-Kopf-Konsum. Von den Instrumentvariablen der ALMP verdrängen die Matchwahrscheinlichkeiten, der Anteil der "Arbeitsunwilligen" und die Lohnkostenzuschüsse Arbeitsplätze. Die Produktivität der Geringqualifizierten, (Wiederbeschäftigungs-) Prämien, Sanktionen für Suchregel-Verstöße sowie die Intensität der Regeldurchsetzung senken die Arbeitslosigkeit. Die Förderung von "Problemgruppen" ist weniger wirkungsvoll als die Förderung der aktiven Jobsuche.Matching model,active labor market policy,PES,search market,heterogeneous unemployment pool,ranking

A Hiring Subsidy for Long-Term Unemployed in a Search Model with PES and Random Search

Our search model combines two search methods, the public employment service (PES) and random search. The separation rate is endogenous, the job matching process consists of three stages. In the first and the second respectively the short-term (STU) and the long-term unemployed (LTU) randomly search for a vacancy. In the last stage the PES matches registered jobseekers with registered vacancies. The LTU cause training costs and, during the training period, have a lower marginal product than the STU. The effects of the hiring subsidy and of profiling techniques to increase the effectiveness of the PES depend on the target group. For target groups, who have relatively low private search costs in comparison with their productivity, not only the hiring subsidy but also the job placement activities of the PES are counterproductive and reduce overall employment.matching model, hiring subsidy, endogenous separation rate, active labour market policy, PES and search market

Job Security as an Endogenous Job Characteristic

This paper develops a hedonic model of job security (JS). Workers with heterogeneous JS-preferences pay the hedonic price for JS to employers, who incur labor-hoarding costs from supplying JS. In contrast to the Wage-Bill Argument, equilibrium unemployment is strictly positive, as workers with weak JS-preferences trade JS for higher wages. The relation between optimal job insecurity and the perceived dismissal probability is hump-shaped. If firms observe demand, but workers do not, separation is not contractible and firms dismiss workers at-will. Although the workers are risk-averse, they respond to the one-sided private information by trading wage-risk for a higher JS. With two-sided private information, even JS-neutral workers pay the price for a JS guarantee, if their risk premium associated with the wage-replacement risk is larger than the social net loss from production.job security; hedonic market; implicit contract theory; guaranteed employment contract; severance pay contract; asymmetric information; prudence

Migration and the Wage-Settings Curve: Reassessing the Labor Market Effects of Migration.

In this paper we examine the labor market effects of migration in Germany on basis of a wage-setting curve. The wage-setting curve relies on the assumption that wages respond to a change in the un- employment rate, albeit imperfectly. This allows one to derive the wage and employment effects of migration simultaneously in a gen- eral equilibrium framework. Using administrative micro data we find that the elasticity of the wage-setting curve is particularly high for young workers and workers with an university degree, while it is low for older workers and workers with a vocational degree. The wage and employment effects of migration are moderate: a 1 percent increase in the German labor force through immigration increases the aggregate unemployment rate by less than 0.1 percentage points and reduces average wages by 0.1 percent in the short run. While native workers benefit from increased wages and lower unemployment, foreign work- ers are adversely affected.Migration; wage-setting curve; labor markets; panel data

Base Period, Qualifying Period and the Equilibrium Rate of Unemployment

Unemployment benefits, benefit duration, base period and qualifying period are constituent parameters of the unemployment insurance system in most OECD countries. From economic research we know that the amount and duration of unemployment benefits increase unemployment. To analyze the effects of the other two parameters we use a matching model with search frictions and show that there is a trade-off between the qualifying and the base period on the one hand and the amount and duration of the unemployment benefits on the other. A country that combines a high level of unemployment benefits with a long benefit duration can neutralize the effect on the equilibrium rate of unemployment with a long qualifying and/or a short base period. -- Lohnersatzleistungen, Anspruchsdauern, Rahmenfristen und Anwartschaftszeiten sind konstituierende Parameter der Arbeitslosenversicherungen in den meisten OECD Ländern. Ökonomische Untersuchungen zeigen, dass Höhe und Dauer der Lohnersatzleistungen die Arbeitslosigkeit erhöhen. Im Rahmen eines Matching-Modells untersuchen wir die Wirkung der anderen beiden Parameter und zeigen, dass ein trade-off zwischen der Anwartschaftszeit und der Rahmenfrist auf der einen und der Höhe und der Dauer der Lohnersatzleistungen auf der anderen Seite existiert. Ein Land mit einer hohen Arbeitslosenunterstützung und langer Anspruchsdauer kann die Wirkung auf die Arbeitslosenquote durch eine lange Anwartschaftszeit und eine kurze Rahmenfrist neutralisieren.Unemployment insurance,base period,qualifying period

Migration and the Wage Curve: A Structural Approach to Measure the Wage and Employment Effects of Migration

Based on a wage curve approach we examine the labor market effects of migration in Germany. The wage curve relies on the assumption that wages respond to a change in the unemployment rate, albeit imperfectly. This allows one to derive the wage and employment effects of migration simultaneously in a general equilibrium framework. For the empirical analysis we employ the IABS, a two percent sample of the German labor force. We find that the elasticity of the wage curve is particularly high for young workers and workers with a university degree, while it is low for older workers and workers with a vocational degree. The wage and employment effects of migration are moderate: a 1 percent increase in the German labor force through immigration increases the aggregate unemployment rate by less than 0.1 percentage points and reduces average wages by less 0.1 percent. While native workers benefit from increased wages and lower unemployment, foreign workers are adversely affected.migration, wage curve, labor demand, panel data