Axel Werwatz

On the Job Search and the Wage Distribution

The article structually estimates an on‐the‐job search model of job separations. Given each employer pays observably equivalent workers the same but wages are dispersed across employers, an employers separation flow is the sum of an exogenous outflow unrelated to the wage and a job‐to‐job flow that decreases with the employers wage. Using data from the Danish Integrated Database for Labour Market Research, the empirical results imply, as predicted by theory, that search effort declines with the wage. Furthermore, the estimates explain the employment effect, defined as the horizontal difference between the distribution of wages earned and the wage offer distribution.

Semiparametric analysis of German East-West migration intentions: Facts and theory

East-West migration in Germany peaked at the beginning of the 90s although the average wage gap between Eastern and Western Germany continues to average about 25%. We analyze the propensity to migrate using microdata from the German Socioeconomic Panel. Fitting a parametric Generalized Linear Model (GLM) yields nonlinear residual behavior. This finding is not compatible with classical Marshallian theory of migration and motivates the semiparametric analysis. We estimate a Generalized Partial Linear Model (GPLM) where some components of the index of explanatory variables enter nonparametrically. We find the estimate of the nonparametric inuence in concordance with a number of alternative migration theories, including the recently proposed option-value-of-waiting theory.

A State Space Model for Berlin House Prices: Estimation and Economic Interpretation

Hedonic regression has become the standard approach for modeling the behavior of house prices. Usually, the common price component is modeled via dummy variables. Based on an approximation for the present value, we deliver an economic interpretation of the common price component. This allows to include explanatory factors like inflation rates, mortgage rates and building permissions. The notional rents for houses are fitted with a flexible hedonic function. We use the EM algorithm to estimate our model with monthly data of single-family house sales from the four South-West districts of Berlin, Germany from 1982:8 to 1999:12. Emphasis is put on the interpretation of the results.

On the Wages of Temporary Help Service Workers in Germany

This paper produces first econometric estimates for Germany of the contemporanous wage gap associated with Temporary Help Service (THS) employment, as well as the long-term effects of THS work on the future earnings of workers. In addition, we present evidence showing that average male real earnings in the THS industry have declined by about 9% in the period 1975-1995. Our estimates of the overall and group-specific wage gaps attached to THS work are large, albeit significantly smaller than those cited in the existing descriptive literature. Moreover, we find no evidence for any discernable negative average long-term earnings e¤ects of THS work. If anything, THS work seems to have aided workers in putting to a halt declines in their relative earnings observable before joining the THS market.

Nonparametric Density Estimation

Contrary to the treatment of the histogram in statistics textbooks we have shown that the histogram is more than just a convenient tool for giving a graphical representation of an empirical frequency distribution. It is a serious and widely used method for estimating an unknown pdf. Yet, the histogram has some shortcomings and hopefully this chapter will persuade you that the method of kernel density estimation is in many respects preferable to the histogram.

Comparing Parametric and Semiparametric Binary Response Models

Binary response models are frequently applied in economics and other social sciences. Whereas standard parametric models such as Probit and Logit models still dominate the applied literature, there have been important theoretical advances in semi- and nonparametric approaches to binary response analysis (see Horowitz, 1993a, for an excellent and up-to-date survey). From the perspective of the applied researcher, the development of new techniques that go beyond Logit and Probit are important for several reasons: 1. Economic theory usually does not provide clear guidelines on how a parametric model should be specified. Hence, the assumptions underlying Probit and Logit models are rarely justified on theoretical grounds. Rather, they are motivated by convenience and by reference to “standard practice.” 2. Misspecification of parametric models can cause parameter estimates and inferences based on these parameters to be inconsistent. Moreover, predictions made from misspecified parametric models can be inaccurate and misleading.

Automated valuation modelling: a specification exercise

Market value predictions for residential properties are important for investment decisions and the risk management of households, banks and real estate developers. The increased access to market data has spurred the development and application of Automated Valuation Models (AVMs), which can provide appraisals at low cost. We discuss the stages involved when developing an AVM. By reflecting on our experience with md*immo, an AVM from Berlin, Germany, our paper contributes to an area that has not received much attention in the academic literature. In addition to discussing the main stages of AVM development, we examine empirically the statistical model development and validation step. We find that automated outlier removal is important and that a log model performs best, but only if it accounts for the retransformation problem and heteroscedasticity.

Firm Wage Differentiation in Eastern Germany a Non-Parametric Analysis of the Wage Spread

In Eastern Germany, wage differentiation between firms has clearly grown, parallel to individual wage differentials. Nevertheless, the wage spread between firms is still much less than in Western Germany. In this paper, a non-parametric decomposition is used to analyze the difference between the wages spread in the two parts of Germany. Only part of the difference can be explained by different economic structures in Eastern Germany. By far, the greater part of the difference in the wage spread between firms in the two parts of the country is due to the fact that differences in wages paid by firms of the same type in Eastern Germany are much less than those of their counterparts in Western Germany. A striking result of the analysis is that the gap in the wage variance between Eastern and Western Germany is increasing.

Single Index Models

A single index model (SIM) summarizes the effects of the explanatory variables X1, ..., Xd within a single variable called the index. As stated at the beginning of Part II, the SIM is one possibility for generalizing the GLM or for restricting the multidimensional regression E(Y|X) to overcome the curse of dimensionality and the lack of interpretability. For more examples of motivating the SIM see Ichimura (1993). Among others, this reference mentions duration, truncated regression (Tobit) and errors-in-variables modeling.

Produktdiversifizierung: Konvergenz zwischen ost- und westdeutschen Unternehmen / Product Diversification: Have East-German Enterprises Caught-Up with the West?

Summary In the aftermath of Germany’s reunification, redesigning their product range was a major challenge for East-German enterprises. At the same time, there were growing signs that Western enterprises reacted to globalization and European integration by increasingly pursuing strategies of specialization. Using representative micro data from Germany’s system of register based, official firm surveys, this paper studies how manufacturing enterprises from both parts of the country reshaped their product policies in recent years. Our analysis reveals a common trend towards greater specialization during the period from 1995 to 2001. This process of focusing on their core competencies and reducing their range of products was more pronounced in the East - most likely as a result of the increased integration of Eastern firms into international markets. We apply a nonparametric decomposition that yields estimates of the structural and regional components of the West-East gap. We find that in 2001 no significant gap remains among Eastern and Western enterprises of a similar, comparable type. However, there still exist pronounced structural differences. In particular, in 2001 East Germany is still lacking the large firms in many industries that push up the level of West German product diversification and economic performance.