Research

In this paper we investigate the effect of a reduction in the outside option within wage bargaining for the decline of the labor share in Germany. We provide evidence of this issue, using the Hartz IV labor market reform in Germany as an exogenous shock in the wage bargaining of employees, and investigate its impact on the labor share. Based on a theoretical model, we outline the effect of a decrease in the outside option. Thereafter, the approach is twofold. Combining the EU KLEMS and Penn World Table databases, we first endogenously identify the Hartz IV reform as a significant structural break, i.e. policy intervention. Second, we estimate the effect of the Hartz IV legislation on the aggregate labor share using a synthetic control approach in which we construct a counterfactual Germany doppelganger. Finally, we use rich firm-level panel data compiled by Bureau van Dijk to support our results using unemployment variation among German counties prior to the Hartz reforms as an identification strategy. We find that the Hartz IV reform decreases the labor share by on average two percentage points. The synthetic control approach furthermore provides evidence that this effect is lasting after the reform was implemented.

This paper investigates the impact of the adoption of a new technology on worker outcomes. Using detailed worker-level data for Germany, we show that the strongest impacts of new technologies arise in the first year of its implementation for overtime, training and perceived labor intensity. These effects diminish after the introduction period. In further tests, we show that changes in outcomes depend on worker’s mobility as well as occupational choices. The impact on worker outcomes therefore primarily occurs when the new technology shapes the work environment of the exposed worker.

In this paper we report the results of an empirical study on the employment growth effects of a policy intervention, explicitly aimed at increasing placement efficiency of the Federal Employment Agency in Germany. We use the Hartz III reform in the year 2004 as an exogenous intervention that improves the matching process and compare establishments that use the services of the Federal Employment Agency with establishments that do not use the placement services. Using detailed German establishment level data, our difference-in-differences estimates reveal an increase in employment growth among those firms that use the agency for their recruitment activities compared to non-user firms. After the Hartz III reform was in place, establishments using the agency grew roughly two percentage points faster in terms of employment relative to non-users and those establishments achieve an increase in the proportion of hires. We provide several robustness tests using for example inverse-probability weighting to additionally account for differences in observable characteristics. Our paper highlights the importance of the placement service on the labor demand side, in particular on the so far overlooked establishment level

This paper studies the effects of voluntary employee representation on product and process innovations. In contrast to statutory forms of codetermination such as works councils, voluntary representation initiated by the management in the form of round table conferences or employee spokespersons is not equipped with any legally granted rights at all. We therefore examine how differences in bargaining power relate to innovative output. Using comprehensive German panel data, we compare both types of representation institutions and differentiate our analysis into incremental and radical product and process innovations. Endogeneity of representation institutions is taken into account by applying linear 2SLS and non-linear recursive multivariate probit models. Further robustness checks using matching algorithms are also applied. Our results show that voluntary employee representation significantly contributes to successfully conducted innovations. With respect to works councils, we find mixed evidence for the impact on product innovation. Additionally, our estimation framework allows us to implicitly test the relationship between voluntary institutions and works councils in which the results point to a substitutive relationship between both types of employee representation. Our results have important implications for the governance of firms.