IAB-Veranstaltungen Archiv - IAB - Institut für Arbeitsmarkt- und Berufsforschung

Transformation pressure in the labour market: heterogeneity, adjustment processes, and lessons for economic policy

The focus is on papers that analyze current transformation processes and examine their heterogeneous effects.

The German economy is going through a period of profound transformation. Technological change, decarbonization and demographic developments are fundamentally changing labor markets – albeit not uniformly, but with significant differences between regions, sectors and groups of workers.

At the same time, structural change is not a new phenomenon. Past transformation processes provide important insights into how labor markets respond to disruptions and the role institutions and policy can play in managing these adaptation processes.

The workshop brings these perspectives together: the focus is on papers that analyze current transformation processes, examine their heterogeneous effects, and/or draw lessons from past transformations for today’s economic policy challenges.

The aim is to exchange up-to-date research that provides new insights into transformation processes and illuminates their economic policy implications.

Foreign Opportunity and Local Revival: Evidence from the French Rust Belt

This paper studies the short- and long-run adjustment of distressed regions to a positive globalization episode.

This paper studies the short- and long-run adjustment of distressed regions to a positive globalization episode: access to an increasingly thriving Luxembourg labor market for residents of the French "Rust Belt". We document a three-phase expansion of local labor markets, driven by a short-run workplace substitution of incumbent workers towards cross-border commuting, a medium-term rise in labor force participation, and a long-run sustained increase in population via net domestic in-migration.

Welfare effects for residents of treated areas are unequal: higher foreign incomes are partly offset by lower domestic employment, rising housing costs and congestion, and reduced fiscal transfers. Improved job opportunities abroad lead to a net decrease in far-right and anti-EU vote shares, muting the rise of populism visible elsewhere in former industrial regions of France.

Taken together, our findings suggest that former industrial regions are not inherently rigid, but that their capacity to adjust depends critically on the nature, scale, and spatial incidence of economic shocks.

Joint work with Antoine Levy.

Trade Integration, Import Competition, and Optimal Unemployment Insurance

This paper investigates the optimal design and implementation of labor market institutions within an open economy framework.

This paper investigates the optimal design and implementation of labor market institutions within an open economy framework. We develop a Heterogeneous Agent New Keynesian (HANK) DSGE model featuring search and matching frictions to analyze the interaction between labor market flexibility and international trade, with a specific focus on the German experience. Our findings suggest that labor market institutions, when analyzed in isolation, have a marginal impact on aggregate unemployment and welfare. However, their efficacy is significantly amplified when an economy is exposed to international trade.

We show that while import competition exerts upward pressure on unemployment in the short run, more flexible labor market institutions are essential for maximizing welfare in the long run. Crucially, we study the optimal policy sequence and find that a stepwise, sequential implementation of reforms is superior to a "big bang" approach. Such a trajectory maximizes aggregate welfare over a longer time horizon by effectively shielding heterogeneous agents from the regressive distributive effects of globalization shocks during the transition phase. Our results provide a normative rationale for gradualism in structural reform agendas within integrated economies.

Koautoren sind Andreas Hauptmann (IAB) und Benjamin Schwanebeck (FernUniversität in Hagen).

Spatial income inequality in Germany, 1957-2021

This study is about income inequality between and within German regions from 1957 to 2021 using a newly collected panel.

We analyze income inequality between and within German regions from 1957 to 2021 using a newly collected panel. We confirm previous evidence on convergence between regions during the decades after World War II, but do not find pronounced regional divergence since the 1990s - in contrast to some earlier studies.

Instead, the national income inequality rise since the 1980s is closely tracked by the near-unanimous rise in income concentration within regions, driven by overproportional labor income growth of the top income decile. Regression analysis suggests that regional growth switched from equality-enhancing to inequality-increasing in the 1990s.

Valuing Non-Wage Amenities: Survey and Experimental Evidence from Army Enlistments

In this paper, we estimate willingness to pay (WTP) across two key amenities in the U.S. Army.

Survey-based discrete choice experiments are widely used to estimate willingness to pay (WTP) for non-wage amenities. Recent innovations in elicitation methods, such as Bayesian Adaptive Choice Experiments (BACE), can generate precise, individualized WTP estimates, making possible a more stringent field test of survey-based discrete choice methods against person-level realized choices.

In this paper, we estimate WTP across two key amenities in the U.S. Army: (i) the compensation recruits require to accept longer initial service obligations, and (ii) recruits’ willingness to pay for a first duty station of their choosing. We implement two complementary approaches. First, we conduct a randomized controlled trial (RCT) that randomizes enlistment bonuses across these amenities, allowing us to estimate WTP for station of choice and for extending recruits’ contractually obligated service from 3 years to 4, 5, and 6 years. Second, we administer a BACE survey to a sample of potential recruits—nearly half of whom subsequently enlist—to estimate the same parameters. We compare estimates across the RCT and survey-based approaches, examining both internal consistency within the survey and external consistency with real-world enlistment choices.

Together, these analyses provide a field test of survey-based valuation methods and suggest that targeted changes to Army enlistment incentive structures could yield substantial cost savings.

Joint: Michael T. Baker, Kyle Greenberg, and Linh Tô

How to Make Tax Systems Regressive

This study is about tax regressivity in a two-period model with intergenerational transfers through bequests, inter vivos gifts, and trust funds.

Our paper proposes a novel mechanism underlying a regressive tax system. We study tax regressivity in a two-period model with intergenerational transfers through bequests, inter vivos gifts, and trust funds.

Transfers are subject to piecewise linear tax schedules with exemptions and positive marginal rates above the allowance. Bequests and inter vivos gifts are perfect substitutes and occur late in life, while trust funds must be established early and involve a sizable fixed cost, making them accessible only to very wealthy individuals.

We show that tax regressivity can arise only for the very and super rich - those who optimally use all three transfer channels. In particular, paying the fixed cost to establish a trust fund is a necessary condition for a declining average tax rate. Regressivity then emerges if and only if any one of the tax allowances falls below a threshold that depends on preferences and marginal tax rates.

Our results highlight the central role of fixed-cost avoidance technologies in generating regressivity at the top of the wealth distribution.

Joint work with Hoang Van Khieu.

Furloughs, Employment, and Worker Reallocation in Normal Times

We discuss about furlough schemes: Are they useful under normal business cycle conditions?

Are furlough schemes useful under normal business cycle conditions? We address this question using administrative data from Finland, where such a scheme has long existed, and a model of firm dynamics with hiring and layoff costs, frictional unemployment, and firm-level wage rigidity.

Furloughs provide firms with flexibility by allowing temporary workforce reductions at a lower cost than layoffs followed by rehiring. Yet in the model, it is optimal to eliminate the furlough option, as it does little to facilitate reallocation from low productivity to high productivity firms and does not reduce layoffs much. In contrast, a small layoff tax improves welfare by balancing employment gains against reduced productivity.

Joint work with Niku Määttänen and Eero Mäkynen.

Find here draft of the working paper.

The Effect of Worker Health Shocks on Coworkers’ Employment and Health Behavior

This study analyzes how a worker’s severe health shock affects older coworkers.

We analyze how a worker’s severe health shock affects the employment and health behavior of their older coworkers. We link comprehensive administrative data on labor market histories and health records from Austria to identify coworker networks and severe health shocks in small firms, which cause substantial increases in healthcare expenditures, absenteeism, and mortality, as well as persistent reductions in the labor supply of affected workers. Combining a matching approach with a difference-in-difference framework, we find a significant impact of a health shock on the labor market outcomes and health behavior of older coworkers.

Affected coworkers are about 2.3 percentage points more likely to be employed in the shock firm and tend to delay retirement. Although there is no change in daily earnings and earnings growth, coworkers are more likely to receive special bonus payments after leaving the firm. The employment effects are larger when the health shock affects a high-skilled worker and when the shocked worker leaves the firm after the health shock.

Finally, we find that female coworkers in the treatment group are more likely to have a mammography, especially in response to health shocks due to cancer. We find no statistically significant effects on participation in general health check-ups and PSA tests, or on coworker absenteeism.

2nd Workshop on Imperfect Competition in the Labor Market

Studies addressing topics from a theoretical and/or empirical perspective for presentation at the workshop.

The Institute for Employment Research (IAB) is pleased to announce our 2nd workshop on imperfect competition in the labor market. Studies addressing one of the following topics from a theoretical and/or empirical perspective are particularly welcome for presentation at the workshop:

Models of monopsonistic and oligopsonistic competition
Quantifying the elasticity of labor supply to the firm
The role of firms in wage-setting and rent-sharing
Outside options and wages
Employment concentration and wages
Policies to remedy imperfect competition