Any opinions expressed here are those of the author(s) and not those of the institute. Research d... more Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.
See for instance Krugman's comment, where he singles out inflexibilities inherent to German cultu... more See for instance Krugman's comment, where he singles out inflexibilities inherent to German culture, citing Immanuel Kant's categorical imperative vs. William James' pragmatism.
he canonical model for studying the impact of immigration is a partial equilibrium model that com... more he canonical model for studying the impact of immigration is a partial equilibrium model that combines one or various types of labor with capital in a constant-returns-to-scale production function (for an early example, see Altonji and Card 1991). The implications of this model for how immigration affects wages and employment are straightforward and intuitive. An expansion of a certain type of labor will lead to a decrease in the wage of native labor of the same type, in absolute terms and relative to other types of labor-as well as an increase in the marginal productivity of capital. This model has led to the common view of immigration being potentially harmful for individuals whose skills are most similar to those of immigrants, but possibly beneficial for those whose skills are different. However, when this canonical model is implemented through empirical models, some studies using this approach find a sizeable effect of immigration on wages of native workers, while others do not. For instance, while Card (2009) finds that immigration to the United States has only a minor effect on native wages, Borjas (2003) provides evidence for wages of natives being harmed by immigration, and Ottaviani and Peri (2012) report positive wage effects on natives. One reaction to these apparently contradictory findings has been to expand the theoretical framework in various ways. For example, one
In this paper, we evaluate the effectiveness of place-based payroll taxes in stimulating local em... more In this paper, we evaluate the effectiveness of place-based payroll taxes in stimulating local employment by exploiting a unique policy setting in Norway, where a system of geographically differentiated payroll taxes was suddenly abolished due to an EU regulation. The reform was enforced independently of the regional labor market developments, creating arguably exogenous variation in the payroll tax rates that firms in different local labor markets faced over time. We find evidence of partial shifting of payroll tax increases on to worker wages as well as a significant decline in local employment. These findings suggest that in settings with some degrees of wage rigidity, place-based payroll tax incentives can be effective in stimulating local employment.
for helpful comments and suggestions.-2-Note The findings in this paper apply to the most recent ... more for helpful comments and suggestions.-2-Note The findings in this paper apply to the most recent scientific use files of the IAB Employment Sample, the IABS 75-01 and IABS 75-04. There are two older scientific use files of the IABS, the basic file IABS 75-95 and the regional file IABS 75-97. The author cautions against using these scientific use files to identify mothers on maternity leave if the focus of the research is to analyze the impact of expansions in maternity leave coverage on mothers' labor market outcomes. The findings in this paper also apply to the two versions of the linked
We study the long-term causal effects of attending a "better" school-defined as one with more adv... more We study the long-term causal effects of attending a "better" school-defined as one with more advanced peers, more highly paid teachers, and a more academic curriculum-on the highest degree completed, wages, occupational choice, and unemployment. We base our analysis on a regression discontinuity design, generated by a school entry age rule, that assigns students to different types of schools based on their date of birth. We find that, even though our case involves larger inter-school differences in peer quality and teaching curricula than in most previous studies, the long-term effect of school quality is very small and not significantly different from zero. This surprising finding is partly explainable by the substantial amount of student up-and downgrading between schools of varying quality at the end of middle school (age 15/16) and at the end of high school (age 18/19). This suggests that giving people a "second chance" during their education can make up for several years of schooling with a less challenging peer group and a less challenging teaching curriculum.
This paper analyzes the evolution of the attainment gap between white British born and ethnic min... more This paper analyzes the evolution of the attainment gap between white British born and ethnic minority pupils throughout compulsory schooling, from the age of 5 to 16. At the start of school, pupils from most ethnic groups substantially lag behind White British pupils, but these gaps decline for all groups throughout primary and secondary school. Language is the single most important factor why most ethnic minority pupils improve relative to White British pupils. Although poverty explains part of the differences in levels, it cannot explain why ethnic minority pupils gain relative to or even overtake White British pupils. All ethnic minority groups initially attend worse performing schools than White British pupils. However, more than 20 percent of the subsequent relative improvement can be attributed to ethnic minority pupils moving up to better schools relative to White British pupils. Finally, our results suggest the possibility that the relative improvement of ethnic minority pupils may be related to teacher incentives to concentrate attention on particular pupils, caused by the publication of school league tables at the end of secondary school.
This paper considers the role of school closures in the spread of the SARS-CoV-2 virus. To isolat... more This paper considers the role of school closures in the spread of the SARS-CoV-2 virus. To isolate the impact of the closures from other containment measures and identify a causal effect, we exploit variation in the start and end dates of the summer and fall school holidays across the 16 federal states in Germany using a difference-in-differences design with staggered adoption. We show that neither the summer closures nor the closures in the fall had a significant containing effect on the spread of SARS-CoV-2 among children or a spill-over effect on older generations. There is also no evidence that the return to school at full capacity after the summer holidays increased infections among children or adults. Instead, we find that the number of children infected increased during the last weeks of the summer holiday and decreased in the first weeks after schools reopened, a pattern we attribute to travel returnees.
Governments are often willing to subsidize firms on the verge of bankruptcy. The main economic ra... more Governments are often willing to subsidize firms on the verge of bankruptcy. The main economic rationale behind these interventions is that a plant closure would not only harm the workers employed in that plant, but create a domino effect on the regional economy as a whole. Yet, little is still known empirically how important these spillover effects are for economic development in the region. In this paper, we use administrative data of all workers and firms in Germany to quantify the spillover effects of mass layoffs. For the empirical analysis, we combine a difference-in-differences estimator with an event-study approach. We find sizeable negative spillover effects on the regional economy: regions, and especially firms producing in the same sector as the firm hit by a mass layoff, lose many more jobs than in the initial layoff. In contrast, we find few negative effects for workers employed (but not directly affected by the layoff) in the region. As such, mass layoffs seem to have ...
Recent evidence suggests that employers acquire more precise information about a worker's product... more Recent evidence suggests that employers acquire more precise information about a worker's productivity the more time he or she spends in the labor market. The following question arises: Is learning symmetric, that is, do all employers have the same information about workers' productivity, or is learning asymmetric, that is, does the current employer have superior information about workers' productivity? This article develops a learning model with endogenous mobility that nests both learning hypotheses. It then proposes new tests for asymmetric employer learning. Overall, learning appears to be mostly symmetric, except possibly when the employees involved are college graduates. I would like to thank Christian Dustmann, Kevin Lang, Alan Manning, and Costas Meghir for comments and suggestions. Financial support from the Economic and Social Research Council (ESRC) and the Gottlieb-Daimler und Karl-Benz Foundation is gratefully acknowledged.
Does the culture in which a woman grows up influence her labor market decisions once she has had ... more Does the culture in which a woman grows up influence her labor market decisions once she has had a child? And to what extent can exposure to a different cultural group in adulthood shape maternal labor supply? To address these questions, we exploit the setting of the German reunification. A state socialist country, East Germany strongly encouraged mothers to participate in the labor market full-time, whereas West Germany propagated a more traditional male breadwinner-model. After reunification, these two cultures were suddenly thrown together, with consequent increased social interactions between East and West Germans through migration and commuting. Zooming in on East and West Germans who migrated across the former inner-German border, we document a strong asymmetry in the persistence of the culture in which women were raised. Whereas East German female migrants return to work earlier and work longer hours than their West German colleagues even after long exposure to the more traditional West German culture, West German migrants adjust their post-birth labor supply behavior nearly entirely to that of their East German colleagues. West German return migrants continue to be influenced by the more gender egalitarian East German norm even after their return to the West, pointing towards the importance of learning from peers. Finally, taking advantage of differential inflows of East German migrants across West German workplaces in the aftermath of reunification, we show that even a partial exposure to East German colleagues induces "native" West German mothers to accelerate their return to work after childbirth, suggesting that migration might be a catalyst for cultural change.
By exploiting a commuting policy that led to a sharp and unexpected inflow of Czech workers to ar... more By exploiting a commuting policy that led to a sharp and unexpected inflow of Czech workers to areas along the German-Czech border, we examine the impact of an exogenous immigration-induced labor supply shock on local wages and employment of natives. On average, the supply shock leads to a moderate decline in local native wages and a sharp decline in local native employment. These average effects mask considerable heterogeneity across groups: while younger natives experience larger wage effects, employment responses are particularly pronounced for older natives. This pattern is inconsistent with standard models of immigration but can be accounted for by a model that allows for a larger labor supply elasticity or a higher degree of wage rigidity for older than for young workers. We further show that the employment response is almost entirely driven by diminished inflows of natives into work rather than outflows into other areas or nonemployment, suggesting that "outsiders" shield "insiders" from the increased competition.
This paper provides an introduction into the estimation of Marginal Treatment Effects (MTE). Comp... more This paper provides an introduction into the estimation of Marginal Treatment Effects (MTE). Compared to the existing surveys on the subject, our paper is less technical and speaks to the applied economist with a solid basic understanding of econometric techniques who would like to use MTE estimation. Our framework of analysis is a generalized Roy model based on the potential outcomes framework, within which we define different treatment effects of interest, and review the well-known case of IV estimation with a discrete instrument resulting in a local average treatment effect (LATE). Turning to IV estimation with a continuous instrument we demonstrate that the 2SLS estimator may be viewed as a weighted average of LATEs, and discuss MTE estimation as an alternative and more informative way of exploiting a continuous instrument. We clarify the assumptions underlying the MTE framework and illustrate how the MTE estimation is implemented in practice.
This paper investigates the effects of technological and organizational change (T&O) on jobs and ... more This paper investigates the effects of technological and organizational change (T&O) on jobs and workers. We show that although T&O reduces firm demand for routine relative to abstract task-based jobs, affected workers do not face higher probability of non-employment or lower earnings growth than unaffected workers. Rather, firms that adopt T&O offer routine workers retraining opportunities to upgrade to more abstract jobs. Older workers form an important exception: T&O increases the risk that they permanently withdraw from the labor market and reduces their earnings, regardless of the tasks they performed in the firm prior to T&O.
This paper analyzes the impact of expansions in leave coverage on mothers' labor market outcomes ... more This paper analyzes the impact of expansions in leave coverage on mothers' labor market outcomes after childbirth. The focus is on Germany, a country that underwent several changes in maternity leave legislation since the late 70s. We identify the causal impact of an expansion in maternity leave by comparing labor market outcomes of women who gave birth shortly (i.e. one month) before and after a change in maternity leave legislation. There is strong evidence that each expansion induced women to delay their return to work. Despite this strong short-term effect, the expansions had little impact on women's labor supply in the long-run. The expansion from 2 to 6 months reduced women's wages, even 8 years after childbirth. This effect is mostly explained by the delay in the return to work. The delay in the return to work caused by the expansions in leave from 6 to 10 months and 18 to 36 months also lowered wages. However, this negative effect is offset by a positive selection effect, resulting in a zero or even positive overall effect.
Any opinions expressed here are those of the author(s) and not those of the institute. Research d... more Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.
See for instance Krugman's comment, where he singles out inflexibilities inherent to German cultu... more See for instance Krugman's comment, where he singles out inflexibilities inherent to German culture, citing Immanuel Kant's categorical imperative vs. William James' pragmatism.
he canonical model for studying the impact of immigration is a partial equilibrium model that com... more he canonical model for studying the impact of immigration is a partial equilibrium model that combines one or various types of labor with capital in a constant-returns-to-scale production function (for an early example, see Altonji and Card 1991). The implications of this model for how immigration affects wages and employment are straightforward and intuitive. An expansion of a certain type of labor will lead to a decrease in the wage of native labor of the same type, in absolute terms and relative to other types of labor-as well as an increase in the marginal productivity of capital. This model has led to the common view of immigration being potentially harmful for individuals whose skills are most similar to those of immigrants, but possibly beneficial for those whose skills are different. However, when this canonical model is implemented through empirical models, some studies using this approach find a sizeable effect of immigration on wages of native workers, while others do not. For instance, while Card (2009) finds that immigration to the United States has only a minor effect on native wages, Borjas (2003) provides evidence for wages of natives being harmed by immigration, and Ottaviani and Peri (2012) report positive wage effects on natives. One reaction to these apparently contradictory findings has been to expand the theoretical framework in various ways. For example, one
In this paper, we evaluate the effectiveness of place-based payroll taxes in stimulating local em... more In this paper, we evaluate the effectiveness of place-based payroll taxes in stimulating local employment by exploiting a unique policy setting in Norway, where a system of geographically differentiated payroll taxes was suddenly abolished due to an EU regulation. The reform was enforced independently of the regional labor market developments, creating arguably exogenous variation in the payroll tax rates that firms in different local labor markets faced over time. We find evidence of partial shifting of payroll tax increases on to worker wages as well as a significant decline in local employment. These findings suggest that in settings with some degrees of wage rigidity, place-based payroll tax incentives can be effective in stimulating local employment.
for helpful comments and suggestions.-2-Note The findings in this paper apply to the most recent ... more for helpful comments and suggestions.-2-Note The findings in this paper apply to the most recent scientific use files of the IAB Employment Sample, the IABS 75-01 and IABS 75-04. There are two older scientific use files of the IABS, the basic file IABS 75-95 and the regional file IABS 75-97. The author cautions against using these scientific use files to identify mothers on maternity leave if the focus of the research is to analyze the impact of expansions in maternity leave coverage on mothers' labor market outcomes. The findings in this paper also apply to the two versions of the linked
We study the long-term causal effects of attending a "better" school-defined as one with more adv... more We study the long-term causal effects of attending a "better" school-defined as one with more advanced peers, more highly paid teachers, and a more academic curriculum-on the highest degree completed, wages, occupational choice, and unemployment. We base our analysis on a regression discontinuity design, generated by a school entry age rule, that assigns students to different types of schools based on their date of birth. We find that, even though our case involves larger inter-school differences in peer quality and teaching curricula than in most previous studies, the long-term effect of school quality is very small and not significantly different from zero. This surprising finding is partly explainable by the substantial amount of student up-and downgrading between schools of varying quality at the end of middle school (age 15/16) and at the end of high school (age 18/19). This suggests that giving people a "second chance" during their education can make up for several years of schooling with a less challenging peer group and a less challenging teaching curriculum.
This paper analyzes the evolution of the attainment gap between white British born and ethnic min... more This paper analyzes the evolution of the attainment gap between white British born and ethnic minority pupils throughout compulsory schooling, from the age of 5 to 16. At the start of school, pupils from most ethnic groups substantially lag behind White British pupils, but these gaps decline for all groups throughout primary and secondary school. Language is the single most important factor why most ethnic minority pupils improve relative to White British pupils. Although poverty explains part of the differences in levels, it cannot explain why ethnic minority pupils gain relative to or even overtake White British pupils. All ethnic minority groups initially attend worse performing schools than White British pupils. However, more than 20 percent of the subsequent relative improvement can be attributed to ethnic minority pupils moving up to better schools relative to White British pupils. Finally, our results suggest the possibility that the relative improvement of ethnic minority pupils may be related to teacher incentives to concentrate attention on particular pupils, caused by the publication of school league tables at the end of secondary school.
This paper considers the role of school closures in the spread of the SARS-CoV-2 virus. To isolat... more This paper considers the role of school closures in the spread of the SARS-CoV-2 virus. To isolate the impact of the closures from other containment measures and identify a causal effect, we exploit variation in the start and end dates of the summer and fall school holidays across the 16 federal states in Germany using a difference-in-differences design with staggered adoption. We show that neither the summer closures nor the closures in the fall had a significant containing effect on the spread of SARS-CoV-2 among children or a spill-over effect on older generations. There is also no evidence that the return to school at full capacity after the summer holidays increased infections among children or adults. Instead, we find that the number of children infected increased during the last weeks of the summer holiday and decreased in the first weeks after schools reopened, a pattern we attribute to travel returnees.
Governments are often willing to subsidize firms on the verge of bankruptcy. The main economic ra... more Governments are often willing to subsidize firms on the verge of bankruptcy. The main economic rationale behind these interventions is that a plant closure would not only harm the workers employed in that plant, but create a domino effect on the regional economy as a whole. Yet, little is still known empirically how important these spillover effects are for economic development in the region. In this paper, we use administrative data of all workers and firms in Germany to quantify the spillover effects of mass layoffs. For the empirical analysis, we combine a difference-in-differences estimator with an event-study approach. We find sizeable negative spillover effects on the regional economy: regions, and especially firms producing in the same sector as the firm hit by a mass layoff, lose many more jobs than in the initial layoff. In contrast, we find few negative effects for workers employed (but not directly affected by the layoff) in the region. As such, mass layoffs seem to have ...
Recent evidence suggests that employers acquire more precise information about a worker's product... more Recent evidence suggests that employers acquire more precise information about a worker's productivity the more time he or she spends in the labor market. The following question arises: Is learning symmetric, that is, do all employers have the same information about workers' productivity, or is learning asymmetric, that is, does the current employer have superior information about workers' productivity? This article develops a learning model with endogenous mobility that nests both learning hypotheses. It then proposes new tests for asymmetric employer learning. Overall, learning appears to be mostly symmetric, except possibly when the employees involved are college graduates. I would like to thank Christian Dustmann, Kevin Lang, Alan Manning, and Costas Meghir for comments and suggestions. Financial support from the Economic and Social Research Council (ESRC) and the Gottlieb-Daimler und Karl-Benz Foundation is gratefully acknowledged.
Does the culture in which a woman grows up influence her labor market decisions once she has had ... more Does the culture in which a woman grows up influence her labor market decisions once she has had a child? And to what extent can exposure to a different cultural group in adulthood shape maternal labor supply? To address these questions, we exploit the setting of the German reunification. A state socialist country, East Germany strongly encouraged mothers to participate in the labor market full-time, whereas West Germany propagated a more traditional male breadwinner-model. After reunification, these two cultures were suddenly thrown together, with consequent increased social interactions between East and West Germans through migration and commuting. Zooming in on East and West Germans who migrated across the former inner-German border, we document a strong asymmetry in the persistence of the culture in which women were raised. Whereas East German female migrants return to work earlier and work longer hours than their West German colleagues even after long exposure to the more traditional West German culture, West German migrants adjust their post-birth labor supply behavior nearly entirely to that of their East German colleagues. West German return migrants continue to be influenced by the more gender egalitarian East German norm even after their return to the West, pointing towards the importance of learning from peers. Finally, taking advantage of differential inflows of East German migrants across West German workplaces in the aftermath of reunification, we show that even a partial exposure to East German colleagues induces "native" West German mothers to accelerate their return to work after childbirth, suggesting that migration might be a catalyst for cultural change.
By exploiting a commuting policy that led to a sharp and unexpected inflow of Czech workers to ar... more By exploiting a commuting policy that led to a sharp and unexpected inflow of Czech workers to areas along the German-Czech border, we examine the impact of an exogenous immigration-induced labor supply shock on local wages and employment of natives. On average, the supply shock leads to a moderate decline in local native wages and a sharp decline in local native employment. These average effects mask considerable heterogeneity across groups: while younger natives experience larger wage effects, employment responses are particularly pronounced for older natives. This pattern is inconsistent with standard models of immigration but can be accounted for by a model that allows for a larger labor supply elasticity or a higher degree of wage rigidity for older than for young workers. We further show that the employment response is almost entirely driven by diminished inflows of natives into work rather than outflows into other areas or nonemployment, suggesting that "outsiders" shield "insiders" from the increased competition.
This paper provides an introduction into the estimation of Marginal Treatment Effects (MTE). Comp... more This paper provides an introduction into the estimation of Marginal Treatment Effects (MTE). Compared to the existing surveys on the subject, our paper is less technical and speaks to the applied economist with a solid basic understanding of econometric techniques who would like to use MTE estimation. Our framework of analysis is a generalized Roy model based on the potential outcomes framework, within which we define different treatment effects of interest, and review the well-known case of IV estimation with a discrete instrument resulting in a local average treatment effect (LATE). Turning to IV estimation with a continuous instrument we demonstrate that the 2SLS estimator may be viewed as a weighted average of LATEs, and discuss MTE estimation as an alternative and more informative way of exploiting a continuous instrument. We clarify the assumptions underlying the MTE framework and illustrate how the MTE estimation is implemented in practice.
This paper investigates the effects of technological and organizational change (T&O) on jobs and ... more This paper investigates the effects of technological and organizational change (T&O) on jobs and workers. We show that although T&O reduces firm demand for routine relative to abstract task-based jobs, affected workers do not face higher probability of non-employment or lower earnings growth than unaffected workers. Rather, firms that adopt T&O offer routine workers retraining opportunities to upgrade to more abstract jobs. Older workers form an important exception: T&O increases the risk that they permanently withdraw from the labor market and reduces their earnings, regardless of the tasks they performed in the firm prior to T&O.
This paper analyzes the impact of expansions in leave coverage on mothers' labor market outcomes ... more This paper analyzes the impact of expansions in leave coverage on mothers' labor market outcomes after childbirth. The focus is on Germany, a country that underwent several changes in maternity leave legislation since the late 70s. We identify the causal impact of an expansion in maternity leave by comparing labor market outcomes of women who gave birth shortly (i.e. one month) before and after a change in maternity leave legislation. There is strong evidence that each expansion induced women to delay their return to work. Despite this strong short-term effect, the expansions had little impact on women's labor supply in the long-run. The expansion from 2 to 6 months reduced women's wages, even 8 years after childbirth. This effect is mostly explained by the delay in the return to work. The delay in the return to work caused by the expansions in leave from 6 to 10 months and 18 to 36 months also lowered wages. However, this negative effect is offset by a positive selection effect, resulting in a zero or even positive overall effect.
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