Abstract

This paper studies two mechanisms how firms can adjust to trade and technology shocks that have attracted little attention so far: training to upgrade worker skills and early retirement to externalize transition costs to public pension systems. We combine new data on training and early retirement in Germany with established measures of local labor markets’ exposure to trade integration with the East and to robotization. We find that automation shocks increase the incidence of training, whereas negative trade shocks reduce it. However, both shocks also increase the incidence of early retirement. Thus, in their reaction to structural change requirements, firms use measures both conducive and detrimental to aggregate productivity.