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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.

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...

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.

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 this paper, a set of neural network (NN) models is developed to compute short-term forecasts of regional employment patterns in Germany. Neural networks are modern statistical tools based on learning algorithms that are able to process large amounts of data. Neural networks 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 specified explicitly. 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 (NUTS 3) 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.

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.

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.

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.

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.