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This paper reassesses the wage curve applying regional price deflators, whereas in the literature only uniform national price levels are generally used in wage curve regressions. Existing estimates for the unemployment elasticities vary across countries but lie mostly in the neighborhood of −0.1. Using the data for the 49 US states over the 2008–2015 period and 16 Polish NUTS2 regions over the 2000–2015 period, we test the impact of regional prices on the wage curve employing a variety of approaches. We confirm the existence of wage curves for both countries. Following the theory of monopsonistic competition, this inverse relationship stems from the costs faced by both firms and workers. However, the elasticity of local unemployment and spatial spillovers decreases significantly if regional price deflators are applied. This is due to the fact that there exists a negative relationship between regional prices and unemployment.

This paper analyses how differences in the degree of occupational routine-intensity affect the costs of job loss. We use worker-level data on mass layoffs in Germany between 1980 and 2010 and provide causal evidence that workers who used to be employed in more routine-intensive occupations suffer larger and more persistent earnings losses after the mass layoff. Furthermore, we are able to show that, at least initially, earnings losses are primarily due to a reduction in the number of days in employment, suggesting that routine-intensive workers face considerable frictions in the adjustment to job loss. Conditional on finding a new job, routine-intensive workers are more likely to change their occupations but end up systematically in the lower end of their new occupation's wage distribution.

Technological progress can have contradictory effects on employment development. On the one hand there is a substitution effect, because the same product can be produced with less labour. On the other hand there is a compensating effect, because prices will be decreased and therefore product demand and also labour demand will be increased. In the article the relative strength of the two effects is discussed and a brief empirical analysis for Germany is given.

"Urbanization and localization effects are known to boost the regional economy and its growth potential. The emergence of these effects is due to localized knowledge flows, the closeness to markets, but also due to the diversity of services and industries. All these effects have the potential to increase the productivity (and profitability) of firms. Whereas many studies have been conducted at the industry or the regional level, this paper adds to the existing literature by starting at the level of establishments and taking the interaction with the surrounding regions into account. This is possible by exploiting an exceptionally large establishment panel study and the employment statistics for Germany. The empirical analyses are carried out in two steps regressions in order to separate the characteristics of establishments from regional influences." (author's abstract)

Purpose – International immigration affects the degree of cultural diversity present in a labour force. The purpose of this paper is to focus on the consequences of immigration with respect to the level of cultural diversity by estimating employment functions for individual establishments. Design/methodology/approach – The theory behind the empirical analyses is based on a “turned around” new economic geography model. The data basis used is a linked employer – employee data set generated by a fusion of the IAB Establishment Panel with the Employment Statistics of Germany, which provides very detailed information about individual workers and establishments. In the empirical part instrumental variables techniques are employed to solve the endogeneity issues involved. Findings – In the empirical analyses it is shown that employment is lower when the degree of diversity is higher, regarding the revenue of an individual establishment as given. From this result it can be derived under the conditions of monopoli...

A problem encountered in many contexts is the estimation of matrices or tables from aggregate, heterogeneous, incomplete and contradictory information. In this paper the Adeton method is presented which can be used for this estimation task under quite general conditions. The Adeton method was originally developed to estimate flow matrices of regional labour markets in the Multi-Accounting System (MAS). However, it is applicable for many purposes, e.g. to estimate contingency tables or input-output and other flow matrices. Adeton is based on a Bayesian inference model: Given a prior probability distribution on the set of possible matrices and information about the actual matrix consisting of a set of linear equality and inequality constraints, the complete matrix with highest posterior probability is calculated. The advantage of the Adeton approach is that it is possible to specify soft constraints which are obeyed only up to a certain degree. It is shown that Adeton is an estimation method of entropy optimization type and in this respect is a generalization of the well known Iterative Proportional Fitting Algorithm (used in log-linear models) or of the equivalent RAS method (used in input-output analysis).

Summary The last decade has been shaped by dramatic developments in international trade, international investment and production, both in terms of the scale of events and in terms of their qualitative nature. Intriguing questions have been thrown up concerning the labor market impact of these developments, notably welfare issues (the evolution of real wages, employment and unemployment), the distribution of income (the wage structure) and employment volatility. Path-breaking innovations in the theories of trade, location and the multinational firm allow a fresh look at these labor market effects. This paper takes stock of these theoretical innovations and contrasts these with the recent empirical research efforts to uncover the labor market implications of trade and FDI. We identify research gaps and highlight promising avenues for future research.

The wage curve postulates that the wage level is a decreasing function of the regional unemployment rate. In testing this hypothesis, most studies have not taken into account that differences in the institutional framework may have an impact on the existence (or the slope) of a wage curve. Using a large-scale linked employer–employee dataset for Western Germany, this article provides a first direct test of the relevance of different bargaining regimes (and of works councils) for the existence of a wage curve. In pooled regressions for the period 1998 to 2006, as well as in worker-level or plant-level fixed-effects estimations, we obtain evidence for a wage curve for plants with a collective bargaining agreement at firm level. The point estimates for this group of plants are close to the −0.1 elasticity of wages with respect to unemployment postulated by Blanchflower and Oswald. In this regime, we also find that works councils dampen the adjustment of wages to the regional unemployment situation. In the other regimes of plants that either do not make use of collective contracts or apply sectoral agreements, we do not find a wage curve.

In many countries regional disparities are fairly large and persistent. Often classification systems are needed to provide succinct information on these disparities. This paper presents a model-based classification system which is designed to assess labour market conditions which influence the outcomes of active labour market policy. The innovation in this paper is the development of a procedure that combines a theory-guided analysis of determinants of regional disparities with standard classification approaches. The procedure is designed to resolve two limitations inherent in many existing classification schemes: first, their purely descriptive nature and second, the lack of a theoretically meaningful organization of the variable selection process. Resumen En muchos paises las disparidades regionales son muy grandes y persistentes. A menudo son necesarios sistemas de clasificacion que proporcionen informacion sucinta sobre tales disparidades. Este articulo presenta un sistema de clasificacion basado en un modelo, disenado para evaluar aquellas condiciones del mercado laboral que influyen en los resultados de politicas activas del mercado laboral. La innovacion de este articulo es el desarrollo de un procedimiento que combina un analisis de orientacion teorica de los determinantes de las disparidades regionales con enfoques estandar de clasificacion. El procedimiento esta disenado para resolver dos limitaciones inherentes a muchos sistemas de clasificacion: primero, su naturaleza puramente descriptiva y segundo, la falta de organizacion teoreticamente significativa del proceso de seleccion variable.

Blanchflower and Oswald [Blanchflower, David G. and Oswald, Andrew J., 1994a, The Wage Curve, (Cambridge, MA, MIT Press), Blanchflower, David G. and Oswald, Andrew J., 1994b, Estimating a Wage Curve for Britain 1973–90, The Economic Journal 104, 1025–1043. Eine praktische Einfuhrung, Nurnberg] reported that they have found an ‘empirical law of economics’ — the Wage Curve. Our paper reconsiders the western German Wage Curve using disaggregated regional data and is based on almost one million employees drawn from the Federal Employment Services of Germany over the period 1980–2004. We find that the wage equation is highly autoregressive but far from unit root. The unemployment elasticity is significant but relatively small: only between − 0.02 and − 0.04. We also check the sensitivity of this elasticity for different population groups (young versus old, men versus women, less educated versus highly educated, German native versus foreigner), confirming that it is stronger the weaker the bargaining power of the particular group.

We analyse whether wage differences between cities and rural areas in western Germany are due to unobserved differences in regional price levels. Since regional prices are available for only 10% of the regions we use multiple imputation to generate prices for all regions. Our results show that the nominal agglomeration wage differential is 25%, whereas the real differential is 19%. If we control for the composition of the labour force and jobs, the real wage differential is 4%. If we additionally control for differences in regional building land prices the agglomeration wage differential vanishes.

Following Blanchflower and Oswald, a “wage curve” describes the wage level as a downward-sloping convex curve of the regional unemployment rate. This article makes two major contributions in the analysis of the wage curve. First, it is recognized that potential endogeneity of the regional unemployment rate should be subject to testing not only in combination with regional-specific effects but also in combination with time-specific effects. For this purpose, the authors develop a new estimator, the spatial first difference 2SLS estimator. Second, it is recognized that wages may not only respond to the regional but also to the national unemployment rate. In the empirical analysis, the wage curve for East Germany is estimated using a comprehensive database that provides panel data classified into 114 administrative districts during the 1993 to 1999 period.

In times of high and persistent unemployment, it has become one of the most important policy tasks in many developed countries to trigger a process of sustained employment growth. An illustrative example is the policy of regional “growth-poles”, which assumes that a local concentration of a specific industry in a limited geographical area will lead to a growth take-off. The theoretical rationale for this type of regional policy can be knowledge spillovers, whose importance for the economic (employment) growth has been emphasised in the endogenous growth literature. Yet, there is a considerable debate about the precise nature of knowledge spillovers. Do the externalities accrue between sectors (Jacobs-externalities), or are they rather intra-sectoral (MAR-externalities)? Apart from the question what local economic structure is conducive for employment growth, an equally important issue concerns the timing of the impact of externalities. Is it the current economic structure that matters for employment growth, or rather the historical economic structure? If the former turns out to be the case, regional policies might become effective immediately. In the latter case the impact of policy might be slower but also longer lasting. In this paper we study the dynamics of local employment growth in West Germany from 1980 to 2001. Using dynamic panel techniques, we analyse the nature and the timing of Jacobs- and Marshall-Arrow-Romer externalities, as well as the impact of general human capital spillovers. Jacobs-externalities are stronger in manufacturing than in services, the opposite is true for MAR-externalities. General human capital spillovers are only found in manufacturing. The influence of all forms of externalities rapidly decays in time, suggesting that they are rather static than dynamic. Additionally, we look at the impact of competition, general agglomeration effects and overly high regional wages on local employment growth.

Using a regression analogue of the shift-share technique we address the explanatory power of various theories about regional differences in employment growth in eastern German districts from 1993 until 2001. We find that overly high regional wages are more important than differences in the qualification, firm-size or industrial structures. The most important source of disparities, however, is the dispersion of idiosyncratic location effects. This suggests that individual districts differ markedly in their capacity to generate employment growth and illustrates the importance of a regional perspective when it comes to the employment problem in eastern Germany in general.

By using a shift-share regression approach the contribution of services to the development of employment in eastern Germany is analysed. The results obtained with highly differentiated data from the employment statistics show that services contributed more to a favourable path of development than other industries. This is due in part to general world-wide processes of structural change and the special situation in eastern Germany. Many subsidies were transferred to the East, which stabilises the special segment of the economy related to local demand. This segment is made up mostly of services in eastern Germany. Processes of industrial change can be explained using structural change approaches. It is shown that processes of de-concentration play a role in explaining regional disparities, since inverse localisation and positive urbanisation effects are visible. For the empirical analyses an augmented approach is applied which uses a generalisation of an econometric analogue from the common shift-share meth...

This article shows how the impulses of the transformation process in eastern Germany have spread through the economy and the labour market. The form of transformation has long-term effects on the form of control over the economy; it is managed largely from western firms. This fact has manifold consequences for the innovation behaviour of plants, among others, which in turn is further related to productivity and thus to the labour market. We argue that this transfers further to persistently lower wages and higher unemployment rates in eastern compared with western Germany.

Using the IAB Establishment Panel, which is representative for western Germany, the authors find that establishment-level wages reacted to variations in the regional unemployment rate. The elasticity of wages with respect to unemployment, they estimate, was about −0.1. This responsiveness of the wage to regional variation is close to estimates found by other researchers (using individual rather than establishment data) for other countries, and contradicts the view that Germany's labor market, largely due to the nature of collective bargaining in that country, is relatively inflexible. Possible explanations for this finding are that the negotiated wage is treated like a minimum wage, with firms deviating from it in order to increase work effort; bargaining between firms and individual workers or between firms and works councils produces wage differences; or collective agreements do not restrict firms to the extent that is often assumed.

The paper provides an outline of a method useful for forecasting problems. The approach is based on a combination of top-down and bottom-up techniques. It is applied to project employment in all 327 (western) German districts for a time span of two years. The most important step in the preparation of the forecast uses the ENTROP method, which is an entropy optimizing procedure, a generalization of common RAS techniques, newly developed for the estimation of matrices from heterogeneous information. In a defined sense the estimated matrix is the most probable one. The method chosen is very flexible and uses any available information extensively. Therefore, the estimates are reliable as is shown in an ex-post forecast. There is a double purpose for the forecast of employment. First, it helps to gain insights in the causal processes generating regional developments and spatial disparities on labour markets. Second, it is useful for regional labour market policies, e.g. the budgetary planning of the Federal Em...

This paper examines the East German wage curve using the employment statistics of the Federal Employment Services of Germany (Bundesanstalt fur Arbeit) over the period 1993–1998. The six waves of this panel include a total of 32,188,684 individual employment spells. The statistics comprise the entire population of people gainfully employed and included in the social insurance system. These are classified into 114 administrative districts (Landkreise). Taking into account the endogeneity of unemployment as well as controlling for region and time effects, this paper finds support for the wage curve in East Germany. The overall unemployment elasticity estimate is −0.15 and is higher for female workers than male workers.

This paper examines the German wage curve using the Institut fur Arbeitsmarkt und Berufsforschung (IAB) employment sample over the period 1981–1990. A random sample of 6590 employees covering 142 labor market regions over a ten year period is considered. The total number of observations is 40 852. Taking into account the endogeneity of unemployment as well as controlling for region and time effects, this paper finds support for the wage curve in Germany. The overall unemployment elasticity estimate is −0.07 and is higher for younger workers than older workers. The wages of less qualified workers are more responsive to local unemployment rates than the wages of more qualified workers. Also the wages of men are slightly more responsive to local unemployment rates than the wages of women. Ignoring endogeneity of the local unemployment rate yields results in favor of the wage curve only for younger and less qualified workers. Accounting for endogeneity of the unemployment rate yields evidence in favor of the wage curve across all types of workers.

The so-called Shift-Share-Regression is used to analyse the development of employment. This does not imply a deterministic decomposition such as in classical Shift-Share-Analysis (Dunn 1960; Loveridge and Selting 1998). Instead, Shift-Share-Regression is a powerful and flexible econometric tool, which is especially suitable for testing theory-based hypotheses. In a basic version it was introduced by Patterson (1991) as a method for analysing and testing regional industrial developments. In contrary to the deterministic Shift-Share-Analysis employment development was examined in a linear model. In Patterson’s analysis the industrial sector structure was used as the sole determining factor alongside the location effects and the national trend, parallel to those of the deterministic analysis. Moller and Tassinopoulos (2000) extended Patterson’s approach by an additional variable for regional concentration. Further theory-based influences were then integrated in various IAB analyses (Blien and Wolf 2002). Some results of these studies are presented below, following an overview of the method.

In Germany the international peace process has important consequences for the economy, especially for the labour market. The German armed forces will be reduced from 520,000 to 370,000. Nearly three quarters of the approximately 830,000 foreign soldiers stationed in Germany are in the process of leaving the country. Parallel to this there will be a reduction of about 100,000 jobs for civil employees. There are strong indicators showing that the market of civil employees is an “internal market” (of the type often described by labour market segmentation theory) and there are high barriers against the mobility of workers. Measures of active labour market policy (especially of the German Federal Office of Labour) supports the transition of civil workers into new jobs. These provisions are assisted by measures of regional policy in regions with relatively high unemployment rates, where the dissolution and reduction of garrisons affect the prosperity of entire regions. In conglomerates with high growth rates, however, positive consequences of the disarmament process can be expected.

A wave curve is a decreasing function of wages on the regional unemployment rate. Most empirical studies on the wave curve ignore possible spatial interaction effects between the regions which are the primary units of research. This paper reconsiders the western German wage curve with a special focus on the geography of labour markets. Spillovers between regions are taken into account. The paper tests whether the unemployment rate in the larger surrounding region also affects wages. In addition, agglomeration effects and effects of local monopsony are assessed. The main data base is a random sample of 974,179 employees observed over the period 1980-2004 and covering 326 NUTS3 units (districts). This rich data set is used to estimate a dynamic wage curve according to the two-step approach of Bell et al. (2002). In the first step one controls for individual heterogeneity and in the second step one allows for spatial effects of unemployment across regions on wages. We check the sensitivity of this wage elasticity to various spatial weight matrices as well as allowing for the endogeneity of unemployment. We also estimate the wage elasticity for various population groups.

"A casual look at regional unemployment rates reveals that there are vast differences which cannot be explained by different institutional settings. Our paper attempts to trace these differences in the regions' labour market performance back to the regions' specialisation in products that are more or less advanced in their product cycle. The model we develop shows how individual profit and utility maximisation endogenously leads to decreasing employment in the presence of process innovation. Things deteriorate even further if the region under observation is less innovative than others. Our model suggests that the only way to escape from this vicious circle is to specialize in products that are at the beginning of their economic life." (Author's abstract, IAB-Doku) ((en))

In this paper, a set of neural network (NN) models is developed to compute short-term forecasts of regional employment patterns in Germany. NNs are modern statistical tools based on learning algorithms that are able to process large amounts of data. NNs are enjoying increasing interest in several fields, because of their effectiveness in handling complex data sets when the functional relationship between dependent and independent variables is not explicitly specified. The present paper compares two NN methodologies. First, it uses NNs to forecast regional employment in both the former West and East Germany. Each model implemented computes single estimates of employment growth rates for each German district, with a 2-year forecasting range. Next, additional forecasts are computed, by combining the NN methodology with Shift-Share Analysis (SSA). Since SSA aims to identify variations observed among the labour districts, its results are used as further explanatory variables in the NN models. The data set used in our experiments consists of a panel of 439 German districts. Because of differences in the size and time horizons of the data, the forecasts for West and East Germany are computed separately. The out-of-sample forecasting ability of the models is evaluated by means of several appropriate statistical indicators.

Most evaluation studies of active labour market policies (ALMP) focus on the microeconometric evaluation approach and work with individual data. The main question is if the interesting outcome variable for an individual is affected by the participation in an ALMP programme. That being done, the direct gain can be compared with the associated costs and the success of the programme can be judged. However, microeconometric approaches estimate in nearly all cases the effect of treatment on the treated, ignoring impacts on the non-participants. Therefore this type of analysis should only be seen as a first step of a complete evaluation, because general equilibrium effects are neglected. These are very likely to occur regarding the immense amounts spend on ALMP in Germany. One possible solution to overcome the pitfalls of the microeconometric approach is to carry out a macroeconometric analysis. Instead of looking at the effect on individuals performance we would like to know if the ALMPs represent a net gain to the whole economy. This is likely to be the case only, if the total number of jobs is positively affected by labour market policies. Empirical work on the macroeconomic effects of ALMPs is rare and this might be due to several reasons. The first obstacle is the absence of an obvious theoretical framework within which to couch the analysis. Leaving the traditional way of 'cheating the Phillips curve' aside we use a standard labour market framework to consider the effects of ALMP on the matching, the job creation and the wage setting process. A second problem which has to be solved is the inherent simultaneity problem. Spending on ALMP should influence the labo market situation but might also be determined by it. One way to solve this, is an instrumental variable approach, where the issue of finding the right instruments is of major importance. A further problem is the availability of suitable data, whic allows to take regional heterogeneity into account. Especially in Germany this is problematic due to permanent adjustments in th regional delimitations of the labour office districts (Arbeitsamtsbezirke). In contrast to other evaluation studies we use adjusted data, which is corrected for these changes. This should allow us to obtain more accurate results. The aim of the study is to add a new perspective to the evaluation of ALMP in Germany. This is done by using regional data to obtain macroeconomic or net-effects of these measures. We hope to give advice for future policy implementation.

This paper examines the development of regional employment in eastern Germany. An approach introduced by Patterson and suggested by Möller/Tassinopoulos is extended for the analyses. This approach uses a generalisation of an econometric analogue of the common shift-share method, which is suggested here as a new "workhorse" for regional analyses. The results obtained with this "shift-share-regression" and with very differentiated data from the employment statistics of eastern Germany show that processes of deconcentration play a role in explaining regional disparities, since inverse localisation and positive urbanisation effects are visible. Such processes can be understood with approaches of "New Economic Geography" (based on Krugman et al.), whereas the general significance of industry-specific effects, which is also becoming clear, can be explained using approaches of structural change, following amongst others Appelbaum & Schettkat. In addition, positive impulses of the qualification structure on regional development are detectable, which can be understood by endogenous growth theory.