Wolfgang Franz

Reasons for Wage Rigidity in Germany

This study investigates institutional and economic reasons for downward wage rigidity regarding three occupational skill groups. Based on a survey of 801 firms in Germany and an econometric analysis, we find strong support for explanations based on the effects of labour union contracts and efficiency wages that differ between skill groups. Survey respondents indicate that labour union contracts and implicit contracts are important reasons for wage rigidity for the (less) skilled. Specific human capital and negative signals for new hires are causes of the stickiness of wages for the highly skilled. Compared with US evidence, German firms seem to attach more importance to labour union contracts and specific human capital.

Wages in the East German Transition Process - Facts and Explanations

We analyze wage developments in the East German transition process both at the macro and at the microeconomic level. At the macroeconomic level, we draw special attention to the important distinction between product and consumption wages, describe the development of various wage measures, labor productivity and unit labor costs in East Germany in relation to West Germany, and relate these developments to the system of collective wage bargaining. At the microeconomic level, we describe changes in the distribution of hourly wages between 1990 and 1997 and analyze the economic factors determining these changes by way of empirical wage functions estimated on the basis of the Socio? Economic Panel for East Germany. The paper also draws some conclusions on the likely future course of the East-West German wage convergence process.

Industry-Level Wage Bargaining: A Partial Rehabilitation - The German Experience

In order to reduce unemployment, it is often recommended that industry-level wage bargaining in Germany should be replaced by a more decentralized system. This paper provides a critical assessment of the current wage bargaining institutions and reexamines the case for a more decentralized system. Based on a theoretical model integrating Insider-Outsider aspects into the comparison, the unformly superior employment performance of a decentralized wage bargaining system is questioned. We conclude that, rather than solely trying to decentralize wage bargaining, a promising policy option may be to improve the skills of the unemployed by efficient labour market policies and to foster institutional reforms such that wage bargaining takes account of the long-run employment consequences of wage setting.

Reform der sozialen Sicherung

The book analyzes the German welfare state. It starts from a theoretical perspective and then develops changes in social security, public health care, and unemployment insurance.

An Economic Analysis of Female Work Participation, Education, and Fertility: Theory and Empirical Evidence for the Federal Republic of Germany

This paper summarizes some facts on female work in Germany and presents some recent econometric explorations. The econometric method adopted is the TOBIT procedure, which allows one to estimate labor supply functions including both hours worked and participation. The general finding is that it is necessary to distinguish among several groups of females: while work participation of young single women decreased substantially, married women have a higher participation rate today than in earlier years. In addition, income elasticities of labor supply and their decomposition are estimated but several caveats regarding these estimates are in order.

The transition from apprenticeship training to work

This econometric study deals with the question as to what extent apprentices, after successfully completing their training, stay with the firm that supplied their training and, if so, how long that job tenure holds. Determinants of both decisions can be seen from both the employer’s and the employee’s viewpoint. These firms are interested in employing apprentices in order to collect the returns from their investment in their training, which frequently is associated with net costs. On the other hand, the firms dismiss apprentices if training is viewed by themselves as a screening device or if apprentices are engaged in work for which, in terms of wages, they are too expensive afterwards. The young trained worker bases his or her decision to stay or to leave on considerations such as experimenting with several jobs.

Wirtschaftspolitische Beratung: Reminiszenzen und Reflexionen

This paper deals with the complex relationship between academic advice given to policy makers, economics as a science, and economic policy. It is seen from the viewpoint of a university teacher who serves (or did so formerly) as an adviser in the advisory council of the Federal Ministry of Economic Affairs and the Council of Economic Experts. The paper addresses the trade-off between doing research work and economic advising, as well as the extent to which economics as a science is established sufficiently enough to advise seriously. Moreover, the reputation of economic advisers and the successful influence of economic advising on economic policy makers is discussed. Copyright Verein fu Socialpolitik und Blackwell Publishers Ltd 2000

The Phillips Curve and NAIRU Revisited : New estimates for Germany

Summary This paper provides new estimates of a time-varying NAIRU for Germany taking account of the structural break caused by German unification using two alternative estimators, the Kalman- Filter and the partially linear model. Estimating a standard Phillips curve, the sum of coefficients associated with expected inflation is far below unity, whatever measure of expected inflation rates is employed. Therefore, either the NAIRU concept is not applicable to Germany or, as it is our suggestion, one estimates the unemployment rate that is compatible with a tolerable inflation rate of say 2 percent following roughly the inflation target put forward by the European Central Bank. The estimates presented in this paper suggest that the NAIRU compatible with 2 percent inflation in Germany is currently around 7 percent if the definition of unemployment follows the concept of the ILO. In contrast to the consensus in the literature, our estimates suggest furthermore that the NAIRU in Germany has not increased since the early 1990s.

Hysteresis Effects in Economic Models

Hysteresis in Economic Relationships: An Overview.- Hysteresis in Trade.- Some Evidence on the Membership Hysteresis Hypothesis in Europe.- Insider-Outsider Influences on Industry Wages.- Testing for Hysteresis in Unemployment An Unobserved Components Approach.- Unemployment and Deterioration of Human Capital.- Hysteresis, Nairn and Long Term Unemployment in Austria.

The past decade's natural rate and the dynamics of german unemployment: A case against demand policy?

This paper attempts to highlight some recent cyclical and structural aspects of the German labor market. Moreover, whenever possible the results of our analysis are compared with findings for the U.S. labor market. Finally, policy implications which may be inferred from our study are discussed at some length. Research on unemployment may draw attention to at least two different but not mutually exclusive problems. The cyclical movement of unemployment gives rise to concern about the amount of the unemployment rate that can be reduced by aggregate demand policy only at the cost of an accelerating inflation rate. The relevant question is whether this unemployment rate has been constant during the last decade or whether it has been subject to (exogenous) shocks such as the oil price explosion and the productivity slowdown. With this knowledge the policy-maker can be advised as to what extent an expansive demand policy is an appropriate tool for achieving lower rates of unemployment without facing an accelerating inflation rate and, moreover, why the reduction of inflation in the seventies by restrictive demand management might cost more unemployment than in the sixties. The latter query calls in question some economic policy measures in the seventies: macroeconomic policy may not be able to make oil cheaper, but can try to mitigate adverse secondary effects on aggregate output and employment. But a recovery will not make the problem of unemployment simply disappear evenly for everyone. The analysis of aggregate unemployment is silent about which group of the labor force shoulders the main burden of unemployment and. is more likely to suffer from extreme low escape probabilities from unemployment. If the notion of a hard core of unemployed