A Bayesian approach to determine the impact of institutions on the unemployment rate

Labor and product market regulations affect the unemployment rate of a country without doubt. Econometricians, however, have yet to establish an unequivocal significance of this impact. Model mis-specification, one of the main underlying problems, is overcome by adopting a Bayesian Model Averaging approach. I apply this method to a panel data set that covers 17 OECD countries for the time period from 1982 to 2005 and for up to 20 potential explanatory variables. 8 institutional indicators are identified as significant determinants of unemployment. Endogeneity due to reverse causality is also considered by applying an instrumental variable estimation approach. --unemployment,institutions,labor and product markets,model averaging

Institutions and unemployment: Do interactions matter?

Isolated effects of labor and product market institutions as well as the interaction between both aforementioned categories on unemployment have been extensively discussed in the empirical literature. However, interaction effects between individual labor market institutions have been widely neglected, mainly due to the infeasibility to correctly specify the model. In this paper, a model averaging approach is adopted to show that considering institutional interactions can improve the explanatory power of macroeconomic models explaining unemployment. The approach permits to tackle model specification problems directly related to the inclusion of a large number of interactions. Using a panel data set for 17 OECD countries from 1982 to 2005, 22 robust and significant interactions can be identified. Furthermore, country-specific marginal effects of institutional changes are calculated and their economic significance is analyzed for selected countries. --Unemployment,Institutions,Labor and Product Markets,Model Averaging,Institutional Interactions,Institutional Design

Labour Market Institutions and Structural Reforms: A Source for Business Cycle Synchronisation?

We focus on the influence of institutional variables on business cycle synchronisation for 20 OECD countries from 1979 to 2003. More precisely, this paper derives measures for similarity of institutions and structural reforms, and investigates direct and delayed reform effects on synchronisation by applying robustness tests to a panel data framework with bilateral data. Our findings indicate a strong instantaneous relationship between both similarity of institutions as well as common structural reforms and business cycle correlation. --Business cycle synchronisation,Institutions,Structural reforms,Robustness test

Market Concentration and the Labor Share in Germany. Bertelsmann Policy Brief #2018/03

Highly innovative firms are commanding a growing share of the market in several industries. This trend not only has an impact on competition and prices – but it also affects the share of overall income going to labor. This, in turn, can exacerbate income inequality

Globalization of the German Automotive Industry: Where Does Added Value Occur? Bertelamann Policy Brief #2019/01

A central aspect of globalization is that companies not only sell their products all over the world, but the production of goods and services is divided into different stages of added value at home and abroad. While direct (bilateral) supplier relations can be understood reasonably well, the direct and indirect added value contributions of domestic and foreign suppliers often remain hidden. Using the German automotive industry as an example, we want to show the extent to which other countries contribute directly and indirectly to added value in this industry’s production

A Bayesian approach to determine the impact of institutions on the unemployment rate

Labor and product market regulations affect the unemployment rate of a country without doubt. Econometricians, however, have yet to establish an unequivocal significance of this impact. Model mis-specification, one of the main underlying problems, is overcome by adopting a Bayesian Model Averaging approach. I apply this method to a panel data set that covers 17 OECD countries for the time period from 1982 to 2005 and for up to 20 potential explanatory variables. 8 institutional indicators are identified as significant determinants of unemployment. Endogeneity due to reverse causality is also considered by applying an instrumental variable estimation approach

Institutions and unemployment : do interactions matter?

Isolated effects of labor and product market institutions as well as the interaction between both aforementioned categories on unemployment have been extensively discussed in the empirical literature. However, interaction effects between individual labor market institutions have been widely neglected, mainly due to the infeasibility to correctly specify the model. In this paper, a model averaging approach is adopted to show that considering institutional interactions can improve the explanatory power of macroeconomic models explaining unemployment. The approach permits to tackle model specification problems directly related to the inclusion of a large number of interactions. Using a panel data set for 17 OECD countries from 1982 to 2005, 22 robust and significant interactions can be identified. Furthermore, country-specific marginal effects of institutional changes are calculated and their economic significance is analyzed for selected countries

Brexit and German-British Production Chains A Sector-Level Analysis of Value Chains fir tge Year 2017. Bertelsmann Stiftung GED Study March 2019

What is value-added trade and why is trading with added value important? Value-added refers to the additional value created by a production step. The sum of the value-added of all production steps is equal to the final value of the product. The value created in a specific country as part of an international production chain can be measured. It is also possible to measure the value-added con-tent in imports and exports of intermediates between different countries. These exports and im-ports are also referred to as trade in value-added or value-added trade. Intermediates trade merely captures the final value-added step and additionally assigns all value-added contributions of previ-ous steps to the supplier of intermediates. In an international comparison, countries with a low value-added share in trade are typically countries where simple assembly of intermediate products is carried out. What is the volume of value-added trade between Germany and the United Kingdom? Looking at total trade, Germany imports 115 billion euro worth of goods and services from the United King-dom, including more than 50 percent intermediates. The United Kingdom imports 70 billion euro worth of goods and services, including around two thirds intermediates. Looking at value added alone, both the United Kingdom and Germany import EUR 50 billion worth of goods and services from each other's partners

Migrant Entrepreneurs in Germany from 2005 to 2014 Their Extent, Economic Impact and Influence in Germany’s Länder. Bertelsmann Stiftung Inclusive Growth for Germany|5

The increasing gaps in income and wealth observed in developed economies around the globe are indicators of problems with inclusive growth. To be sure, the extent of these gaps varies across and within these economies, including Germany. The OECD has found that certain population groups benefit disproportionately from this group, while others are left behind (OECD 2015: 9 and 17). This is not a purely monetary phenomenon, but rather is closely related to the distribution of participation opportunities (e.g., with regard to working life) in a society