Uwe Blien

The German wage curve: evidence from the IAB employment sample

Abstract 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.

Cultural Diversity and Local Labour Markets

Suedekum J., Wolf K. and Blien U. Cultural diversity and local labour markets, Regional Studies. The diversity of nationalities of foreign workers in the German labour market has increased considerably over the period 1995–2006. This paper investigates the effects of this diversity for native employees at the local level. The higher is high-skilled foreign employment, the higher are local wages and employment levels for natives. These effects are reinforced the more diverse is the group of high-skilled foreigners. For low-skilled foreigners benefits from diversity are also found, but only conditional on the overall size of this group. These results suggest that cultural diversity benefits native workers by raising local productivity.

The East German wage curve 1993-1998

Abstract 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.

NEW EVIDENCE ON THE WAGE CURVE

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.

The institutional context of an empirical law: the wage curve under different regimes of collective bargaining

The wage curve identified by Blanchflower and Oswald (1994) postulates that the wage level is a decreasing function of the regional unemployment rate. In testing this hypothesis, most empirical 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 data set for western Germany, this paper provides a first 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.

Entropy Optimizing Methods for the Estimation of Tables

A new procedure for the problem of recovering tabular data in case of incomplete or inconsistent information is presented. It generalizes the well kown RAS (or IPF) algorithm by allowing a wider class of constraints concerning the table entries such as equalities and inequalities over arbitrary cross sections. The theoretical background of the procedure is outlined and some examples of applications are reported.

Labor Market Effects of Trade and FDI: Recent Advances and Research Gaps

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.

New Neural Network Methods for Forecasting Regional Employment: An Analysis of German Labour Markets

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.

Identification Risks of Microdata Evidence from Experimental Studies

In the social sciences and in other fields where data from individual respondents are collected, it is an important concern that information remains confidential and that the identity of individual data providers is not disclosed. For several realistic scenarios, the present article examines the risks of discovering the identity of data providers even in cases where the microdata have been previously anonymized by some procedure. The results show that, even under peculiarly risky conditions, the identification risk is smaller than has been assumed by previous research. The inherent unreliability of measurement is found to be an implicit protection of anonymity and a natural barrier to identification.

Service industries and regional development: An analysis for eastern Germany

By using a shift-share regression approach the contribution of services to the development of employment in eastern Germany is analysed. The results obtained with highly differentiated data from the employment statistics show that services contributed more to a favourable path of development than other industries. This is due in part to general world-wide processes of structural change and the special situation in eastern Germany. Many subsidies were transferred to the East, which stabilises the special segment of the economy related to local demand. This segment is made up mostly of services in eastern Germany. Processes of industrial change can be explained using structural change approaches. It is shown that processes of de-concentration play a role in explaining regional disparities, since inverse localisation and positive urbanisation effects are visible. For the empirical analyses an augmented approach is applied which uses a generalisation of an econometric analogue from the common shift-share method. It combines the strengths of the traditional approach with all the advantages of theory-oriented modelling and regression analysis.