The determinants of local employment dynamics in Western Germany

"This paper studies the impact of the local industrial structure on employment dynamics in Western Germany. Following an approach of Combes/Magnac/Robin (2004) for France, local employment growth is decomposed into internal growth resulting from employment changes in existing plants and into external growth determined by employment decisions of newly established plants. The dynamics of both components are estimated simultaneously, taking explicitly into account the timing of the impact of specialization, diversity, and competition in a region. The analysis is conducted for 24 sectors in the West German labor market regions from 1993 to 2002. Estimation results emphasize the positive influence of diversity on both internal and external employment growth, whereas there is no clear result on specialization. A high degree of competition fosters external employment, but is detrimental to internal employment. Dynamic panel regressions show that static externalities dominate. Importantly, the impact of the local industrial structure on employment dynamics does not differ between small and larger plants, nor are there fundamental differences between Western Germany and France." (Author's abstract, IAB-Doku) ((en))Beschäftigungsentwicklung - Determinanten, regionale Verteilung, Wirtschaftsstruktur, Wettbewerbsbedingungen, IAB-Betriebs-Historik-Panel, Betriebsgröße, Westdeutschland, Frankreich, Bundesrepublik Deutschland

The European Union’s Trade Potential afterthe Enlargement in 2004

The objective of this paper is to investigate the trade potential of the fifteen old EU countries with the ten new members having joined on May 1st, 2004. Our focus lies not so much on the integration process already having taken place, but on the importance of institutional factors for trade. To this aim we estimate a standard gravity model applying both cross-section as well as static and dynamic panel data techniques. We conclude that there is further potential for trade resulting not from the formal accession to the EU, but rather from the successive alignment of the new members´ institutional frameworkto EU standards.European integration gravity model trade potential institutions

EU Enlargement : Challenges for Germany's New Laender

EU enlargement offers significant welfare gains to old and new member states. However, these welfare gains do not come automatically but have to be earned by appropriate adjustments in domestic policies. This is particularly relevant for Germany's New Laender, which could benefit from the proximity to the new EU member states in Central and Eastern Europe but which also suffer particularly from inefficient institutions in Germany. Welfare gains will only be realised if wage adjustment is flexible. Instead, the German welfare system implicitly creates downward rigid wages. Without appropriate social policy reforms, the competitive pressure and the mobility of capital will destroy jobs in the New Laender. The paper shows the potential benefits and risks of economic integration in a simple partial equilibrium setting with flexible and rigid labour markets, respectively. We also discuss the entrepreneurial willingness and ability in the New Laender to adjust to the changing competitive conditions after EU enlargement. --EU enlargement,labour markets

Institutions, trade, and integration: what can be expected within the enlarged EU?

This paper investigates the potential for a further increase in trade between the fifteen old EU members and the twelve new countries having joined in 2004 and 2007 that results from a convergence of the new members' institutions towards the level of the EU-15 in accordance with the Acquis Communautaire. To this aim we estimate a gravity model applying both static and dynamic panel data techniques and incorporate detailed variables measuring institutional quality. We conclude that there is further potential for trade resulting from the successive convergence of the new members´ institutional framework towards EU standards. --European integration,institutions,gravity model,trade potential

How important are agglomeration effects for plant performance? Empirical evidence for Germany

The question whether agglomeration effects are of importance for regional development has a long tradition in regional science. This paper asks if regional characteristics and specifically ag-glomeration effects influence the performance of plants in Germany and, if so, in which direction. Hence, we aim at contributing to the still sparse empirical studies in this field of research by adding three aspects to the existing evidence. First, we provide the first plant-level evidence on regional agglomeration effects for Germany. Second, while earlier papers looked only at few sectors of the economy or only at manufacturing, we extend our analysis to the services sector. Finally, we are among the first who identify agglomeration effects while controlling for the internal structure of the establishments using a rich set of plant characteristics that are likely to influence productivity. To this end we estimate plant-level production functions augmented by regional characteristics and controlling in detail for plant-specific features. The analysis is conducted both within a static and a dynamic panel framework. We use the IAB Establishment Panel, a large-scale German establishment survey covering around 16,000 estab-lishments each year. In the static framework we find support for the positive impact of localization economies and market size, while urbanization seems to have a negative influence. Results for the dynamic models are rather inconclusive

Job Hopping and Economic Agglomeration in Germany

This paper investigates whether labor mobility varies with the degree of agglomeration and, if so, how the differences can be explained. The theoretical basis rests on the advantages agglomerations exhibit in providing a large pooled labor market, one of Marshall's famous three sources of agglomeration economies. Only a small number of studies have so far investigated how the concentration of economic activity interacts with local labor market dynamics. They generally find support of the hypothesis that labor market pooling works better in agglomerations. Since most of the relevant literature is limited by sectoral and geographic restrictions, however, the question whether there exists a general relationship between job hopping and economic density still remains to be answered. This paper aims at answering this question and thus at contributing to the still sparse literature on the effect of both urban and industrial agglomeration on labor market pooling. Taking advantage of a unique and comprehensive data set on all establishments and employees for Germany that are subject to social security contributions, I exploit information on the movement of workers in and out of establishments as well as detailed information on worker and establishment characteristics. The analysis covers the years from 2001 to 2009 and is carried out for Germany on the level of NUTS3-regions and a disaggregated industry classification. In total, it contains information on roughly 29 million establishments and 291 million employees. First empirical results do not support the hypothesis that, in general, it is easier for employees to job hop in agglomerations than in rural areas. The data for all industries shows that, although job mobility tends to diminish with the degree of deagglomeration, in rural regions it is almost as high as in the dense core cities. This pattern is especially pronounced in the manufacturing sector, where labour turnover rates in the rural regions are 10 percentage points higher than in core cities. In the service sector, by contrast, labor mobility is indeed higher in agglomerated regions. This pattern can be regarded as a first hint in favor of the advantages of agglomerations in terms of labor market pooling. The relationships that emerged with respect to the broad sectoral classifications will be further investigated with the help of econometric techniques that also take into account the information on the establishment and worker characteristics

The determinants of local employment dynamics in Western Germany

"Im Zentrum dieses Artikels steht die Frage, wie sich die Art der regionalen Wirtschaftsstruktur auf die Beschäftigungsentwicklung in einer Region auswirkt und welchen zeitlichen Einflüssen diese Zusammenhänge unterliegen. Aufbauend auf einer Studie für Frankreich von Combes/Magnac/Robin (2004) wird dasWachstum der Gesamtbeschäftigung unterteilt in internes Wachstum, das aus Veränderungen in bestehenden Betrieben herrührt, und in externes Wachstum, das durch neu in die Märkte eintretende Betriebe verursacht wird. Die Dynamik beider Komponenten wird mittels eines panel-vektorautoregressiven Modells spezifiziert und mit dynamischen Panelmethoden geschätzt. Als erklärende Variablen, die die regionale Wirtschaftsstruktur charakterisieren, werden Maße für die Spezialisierung, Diversifizierung und das Ausmaß des Wettbewerbs herangezogen. Die Analyse erfolgt für den Zeitraum von 1993 bis 2002 und für 24 Branchen in den westdeutschen Arbeitsmarktregionen. Die Ergebnisse betonen den Einfluss von Diversifizierung undWettbewerb, wobei statische Externalitäten dominieren. Der Einfluss der regionalen Wirtschaftsstruktur auf die Beschäftigungsentwicklung greift gleichermaßen bei den kleinen wie auch den größeren Betrieben, die Unterschiede zwischen Westdeutschland und Frankreich sind nur gering." (Autorenreferat)"This paper studies the impact of the local industrial structure on employment dynamics in Western Germany. Following an approach of Combes/Magnac/Robin (2004) for France, local employment growth is decomposed into internal growth resulting from employment changes in existing plants and into external growth determined by employment decisions of newly established plants. The dynamics of both components are estimated simultaneously, taking explicitly into account the timing of the impact of specialization, diversity, and competition in a region. The analysis is conducted for 24 sectors in the West German labor market regions from 1993 to 2002. Estimation results emphasize the positive influence of diversity on both internal and external employment growth, whereas there is no clear result on specialization. A high degree of competition fosters external employment, but is detrimental to internal employment. Dynamic panel regressions show that static externalities dominate. Importantly, the impact of the local industrial structure on employment dynamics does not differ between small and larger plants, nor are there fundamental differences between Western Germany and France." (author's abstract

Demographic change and unemployment in East Germany: how close are the ties?

In East Germany a profound demographic change has been taking place that manifests itself in the shrinkage and the aging of the population. One major cause is the drop in the East German fertility rates by about half directly after the reunification of Germany in 1990. In no other countries of the former Eastern Bloc, this process was so drastic and abrupt as in East Germany. Around the year 2007, the small after-reunification cohorts started to enter the East German labor market that had been characterized for many years by high unemployment and declining employment. Beginning in 2005, however, the situation on the labor market reversed. At the same time, substantial labor market reforms were started in Germany that have additionally spurred employment. Given these developments, the question arises if and to what extent the labor market entry of the young and smaller cohorts has affected the declining unemployment rate in East Germany. This paper tackles the question of the ties between demography and unemployment in East Germany and to this end draws on the concepts of the cohort crowding literature. Using data from official population and labor-market statistics for the period from 1993 to 2012, we calculate both a direct and an indirect effect of aging on unemployment. For the direct effect we decompose the East German unemployment rate in three components. We find that not changes in the age structure of the population but rather labor-market effects had the greatest impact on the decrease in unemployment. For the econometric analysis of the indirect effect, we use information on the small-scale regional level and resort to spatial panel methods. The results yield a strong relation between the youth as well as the old-age dependency ratio and the unemployment ratio. A decline in the youth dependency ratio of one per cent comes along with a decline of the unemployment ratio of 0.489 per cent. Likewise, an increase of the old-age dependency ratio of one per cent is accompanied by a fall of the unemployment ratio of 0.470 per cent. Overall, our results provide evidence that the declining unemployment rate in East Germany is indeed affected by aging. Thus, a reversed cohort crowding effect has been taking place in the East German labor market

Return migration to East Germany: Spatial patterns and the relevance for regional labor markets

Against the background of bad labor market conditions with high unemployment, poor job prospects, and low wages, East Germany used to experience long-standing high net migration outflows. During the last years, however, the situation on the East German labor market changed fundamentally, and employers nowadays increasingly experience problems with the recruitment of qualified workers. One popular way to stabilize labor supply has become the systematic approach of East Germans who migrated to West Germany to induce their return. So far, however, the few empirical studies on this topic have relied on survey data or case studies, thereby providing only selective insights on return migration to East Germany. It is thus still an open question how many return migrants there are, which regions they return to, and how relevant their return would be for the local labor markets. In this paper, we analyze labor-market related return migration from West to East Germany and provide some answers to the question on the relevance for local labor markets. Using a unique data set that covers all labor market participants in Germany, we trace the migration and employment history of East Germans as of December 31st, 2012 from 1999 onwards. Our research adds to the existing literature in several ways. First, complementing survey-based findings, we provide detailed and comprehensive descriptive evidence on migration from West to East Germany. Second, we map the spatial migration patterns of the return migrants on the level of NUTS3-regions. Special emphasis is given to the relocation of the place of living only against the simultaneous relocation of the place of work. Third, we take a detailed look at all labor market participants. Apart from employees liable to social security, we consider unemployed, apprentices, and marginally employed. For all four groups, we investigate whether they maintained or improved their labor market status by migration. This way, we contribute to the discussion on the relevance of economic motives versus social ties as motives for return migration. Our results provide good news for the East German districts directly at the former intra-German border, the larger cities and the regions surrounding Berlin that might well profit from return migration for the stabilization of regional labor supply. However, for the remaining mostly rural regions they rather provide bad news

The pre-exit performance of German plants - How long is the 'shadow of death'?

This paper deals with the question whether firms' employment performance in the periods preceding their exit can be regarded as casting a 'Shadow of Death' on their final leaving the market. This aspect is of high relevance for politicians and other decision-makers, because by knowing more about possible indicators of market exit and possible problems of firms, they might have instruments at hand to detain unwanted firm deaths. Although it can be seen as a stylized fact that exiting firms exhibit a worse economic performance in the time before exit, a systematic and detailed analysis of the pre-exit perfomance seems warranted. With specific regard to Germany, it is not clear how long the Shadow of Death is and which influence can be attributed to other factors specific to the firm, its employees or its environment. We study the pre-exit performance of German plants in terms of employment change and to this use a comprehensive data set that covers the whole of Germany and contains monthly plant data for the years from 1999 to 2012. Carrying out detailed sector-, region- and time-specific analyses, in a first step we are able to complement the existing literature on the Shadow of Death in detailed descriptive respects. Furthermore, it is not very clear how long the Shadow of Death is and which influence can be attributed to factors specific to the firm, its employees or its environment. Therefore, in a second step we use statistical matching approaches to identify the causal relations. We use a two-step matching procedure using covariate and nearest neighbour matching. In a final step, the conditional difference-in-difference estimator is applied. First descriptive results show that most of the exits take place at the end of a quarter in a year, especially at the end of the fourth quarter. Furthermore, the surviving plants start and operate with more employees. A Shadow of Death exists nearly as long as the plant exists, i.e. here eight or nine years long. On average and for larger plants, employment decline starts between 54 and 63 months before closure