Capacity for Innovation: Among Leading Industrial Countries, Germany Only Manages a Middle Rank

The capacity of people and companies to bring about innovations, that is, to create new knowledge and implement this in new marketable products and services, is of prominent importance for growth and prosperity in highly developed industrial countries. On commission of Deutsche Telekom Stiftung and Bundesverband der Deutschen Industrie (BDI, Federation of German Industries), DIW Berlin has prepared an overall indicator of innovative capacity for the first time this year, in which Germany and 12 other leading industrial countries are studied. Germany takes sixth place following frontrunner USA, three Scandinavian countries and Japan, but does not have any clear advantages over the other large European countries, Great Britain and France.

The Prevalence of Internal Labour Markets - New Evidence from Panel Data

In recent years, a small but growing literature concerned with the empirical analysis of the workings of internal labour markets has emerged. These studies, which have almost exclusively been based on personnel records data from single firms, notably Lazear (1992) and Baker, Gibbs and Holmström (1994), have begun to provide some empirical evidence on many of the issues raised by the primarily theoretical field of personnel economics. Instead of one further single firm study, this paper uses an employer-employee linked data set based on 222 Danish private sector, medium-sized or large firms during the period 1980 to 1995. The principal aim of the study is to look for evidence of internal labour markets by focussing on whether there are stable careers, whether being an incumbent has advantages for one’s subsequent career, and on to what extent and how wages are set within the firm. We also examine the influence of the external labour market on wage setting within firms. The data set allows us to examine whether firms differ, and if so, if there are industry-specific differences or differences between growing, stable, and declining firms. Moreover, our study provides insights different from those of earlier work by comparing the internal labour markets of managerial employees with those of the much less studied non-managerial workersInternal labour markets; Careers; Promotions; Firms’ wage structures

House Prices and Replacement Cost: A Micro-Level Analysis

According to housing investment models, house prices and replacement cost should have an equilibrating relationship. Previous empirical work mainly based on aggregate-level data has found only little evidence of such a relationship. By using a unique data set, covering transactions of single-family houses over a 25 years period, we establish strong support for the relationship at the micro level. In the time series context, we find that new house prices and replacement cost align quickly after a shock. In the cross-sectional context, we find prices of old houses and replacement cost are closely related once building depreciation has been taken into account. As to be expected from these results, replacement cost information also proves to be useful for the prediction of future house prices.Tobin's Q, building depreciation, prediction accuracy

On the Wages of Temporary Help Service Workers in Germany

This paper produces first econometric estimates for Germany of the contemporanous wage gap associated with Temporary Help Service (THS) employment, as well as the long-term effects of THS work on the future earnings of workers. In addition, we present evidence showing that average male real earnings in the THS industry have declined by about 9% in the period 1975-1995. Our estimates of the overall and group-specific wage gaps attached to THS work are large, albeit significantly smaller than those cited in the existing descriptive literature. Moreover, we find no evidence for any discernable negative average long-term earnings e¤ects of THS work. If anything, THS work seems to have aided workers in putting to a halt declines in their relative earnings observable before joining the THS market.temporary help services agency work wages

The determinants of debt and (private-) equity financing in young innovative SMEs: evidence from Germany

Financial theory creates a puzzle. Some authors argue that high-risk entrepreneurs choose debt contracts instead of equity contracts since risky but high returns are of relatively more value for a loan-financed firm. On the contrary, authors who focus explicitly on start-up finance predict that entrepreneurs are the more likely to seek equity-like venture capital contracts, the more risky their projects are. Our paper makes a first step to resolve this puzzle empirically. We present microeconometric evidence on the determinants of debt and equity financing in young and innovative SMEs. We pay special attention to the role of risk for the choice of the financing method. Since risk is not directly observable we use different indicators for financial and project risk. It turns out that our data generally confirms the hypothesis that the probability that a young high-tech firm receives equity financing is an increasing function of the financial risk. With regard to the intrinsic project risk, our results are less conclusive, as some of our indicators of a risky project are found to have a negative effect on the likelihood to be financed by private equity

Credit and Private Equity Financing in Young Innovative Small and Medium-sized Companies in Germany

Successful newly established companies are a significant factor for the prosperous development of a national economy. Young innovative companies play a key role in the quick market launch and distribution of new technologies and products. As founders only rarely have sufficient own funds, financing has a considerable influence on the success of a newly established company. In the course of the investment boom in the USA and the breathtaking speed at which American Venture Capital (VC) companies listed their newly established portfolio companies in the stock market, the general attitude seems to be that a strong VC sector makes a significant contribution to the establishment of new companies and to innovation. However, it remains to be seen what role banks play in financing young technology companies. The analysis conducted by DIW together with the KfW bank group concerning the financing pattern of credit institutions and private equity companies in the sector of young technology companies is an initial contribution towards closing the gap in regard to the German market.1 The result of the analysis2 is that private equity is very likely to flow into investments bearing a higher financial risk. However, such clear statements cannot be made in connection with the economic performance risk _ possibly expressed in terms of innovation contents and objectives of the project. Many indicators for the economic performance risk _ this includes the company's R&D-orientation as well as various characteristics of the executed innovation projects _ proved to be insignificant or do not show the expected trend. Only the variable 'regular research and development' increases the likelihood of receiving private equity financing. The next step in the course of the research cooperation between DIW Berlin and the KfW bank group will be the quest for the causes of these unexpected findings.

Firm Specific Wage Spread in Germany - Decomposition of regional differences in inter firm wage dispersion

The purpose of this paper is to sort out firm-related differences from effects that result from different economic structures. A non-parametric decomposition is used to analyse firm level difference between the wage spread in the two major regions of unified Germany. If firm-specific effects explain wage dispersion between firms, a decomposition of the wage dispersion between firms is necessary. The decomposition can help to find out, whether the economy-wide results for different regions are due to the composition of the regional economies by industries and firm-size, or whether the differences are due to firm-specific influences, like distinctions in market power. For Germany, a considerable part of the difference in the wage spread between the East and the West can be explained by different economic structures. However, by far the greater part of the difference in the wage spread between firms in the two parts of the country results from lower wages paid by firms of the same type in East Germany compared with their counterparts in West Germany.Productivity, Wage Differentiation, Wage Spread, Firm Wage Levels, Wage Sharing, Non Parametric Analysis, Decomposition

East Germany’s Wage Gap: A non-parametric decomposition based on establishment characteristics

East German wages have been below the West German wage level since unification. Moreover, the East-West wage gap implied by the contractual wages specified in collective wage agreements is drifting ever further apart from the wage gap in terms of effective wages. This paper looks at the role of establishment-specific factors — such as sectoral affiliation and size of the labour force — in this process. A non-parametric decomposition that has played a prominent role in the gender wage-gap literature is applied to breakdown the East-West wage gap into its constituent components. Using establishment data from the German employment statistics, the paper demonstrates that the divergence between wage agreements and effective wages is probably not a consequence of a massive escape from collective wage agreements, or the intense use of opt-out clauses in such agreements in East Germany. Rather, the shift of East Germany’s economic structure towards lower-paying types of companies has caused the lagging behind in the adjustment of wages.Regional Wage Gap, Decomposition, Nonparametric Regression

Economic Growth of Agglomerations and Geographic Concentration of Industries – Evidence for Germany

The vast majority of regions in West Germany, and the EU, have become more similar in terms of per-capita income and productivity between 1980 and 2000. But a number of rich areas - generally large agglomerations - have succeeded in departing from this trend of convergence. They are continuing to rise above the average productivity level. We examine whether this development can also be seen as due to changes in the spatial distribution of economic sectors. Knowledge-intensive services in particular are identified as industries that combine employment growth and further geographical concentration. Logistical and nonparametric regressions confirm a positive relation between the regional weight of sectors that are continuing to concentrate geographically and the probability that this region will develop ahead of the general trend. We find that increasing localisation of fast growing industries is an important factor behind the changes in the spatial pattern of the economy.regional convergence, knowledge-intensive services, industry-specific local linkages, logistical regressions, non-parametric regressions

Economic Growth of Agglomerations and Geographic Concentration of Industries: Evidence for Germany

The vast majority of regions in West Germany, and the EU, have become more similar in terms of per-capita income and productivity between 1980 and 2000. But a number of rich areas - generally large agglomerations - have succeeded in departing from this trend of convergence. They are continuing to rise above the average productivity level. We examine whether this development can also be seen as due to changes in the spatial distribution of economic sectors. Knowledge-intensive services in particular are identified as industries that combine employment growth and further geographical concentration. Logistical and non-parametric regressions confirm a positive relation between the regional weight of sectors that are continuing to concentrate geographically and the probability that this region will develop ahead of the general trend. We find that increasing localisation of fast growing industries is an important factor behind the changes in the spatial pattern of the economy.