Research

Working Papers

Worker Representatives [submitted]

(with Julian Budde, Thomas Dohmen and Simon Jäger)

Abstract (click to expand): We study the representation of workers through professional worker representatives, focusing on the selection of German works council representatives and their impact on worker outcomes. We examine differences in the effects of blue- and white-collar representatives, motivated by the observation that blue- and white-collar workers exhibit different preferences, e.g., concerning job security. Using retirement-IV and event-study designs, we find that electing blue-collar representatives significantly reduces involuntary separations, consistent with their stronger emphasis on job security compared to their white-collar coun- terparts, and has no effect on the wages of the represented. We further show that becoming a professional representative leads to substantial wage gains for blue-collar workers. Both blue- and white-collar representatives are positively selected in terms of pre-election earnings and person fixed effects. In terms of descriptive representation, we document that blue-collar workers are close to proportionally represented among works council representatives, in contrast to representation of blue-collar workers in other domains.

When Institutions Interact: How the Effects of Unemployment Insurance are Shaped by Retirement Policies

(with Matthew Gudgeon, Pablo Guzman, Johannes Schmieder and Han Ye)

Abstract (click to expand): We show that the non-employment effects of unemployment insurance (UI) for older workers depend critically on retirement policy. Using German data, we document large bunching in UI inflows at the age that allows workers to claim their pension following UI expiration. Inflows respond strongly to several UI and pension reforms. We probe the implications of these behavioral responses using a dynamic model and find that Germany’s UI and retirement policy changes had substantial effects on the unemployment rate of older workers. Furthermore, we calculate large fiscal externalities from extending UI for older workers, especially under generous retirement policies.

Unemployment Insurance Receipt, Take-Up and Labor Market Conditions [under revision]

Abstract (click to expand): This paper examines new facts about the incidence of unemployment insurance (UI) receipt after job seperations. Using German administrative data over 30 years, I show that among likely eligible job exiters, about 27% do not receive any UI in their first year after job-loss and this share varies substantially with current labor market conditions: The UI recipiency rate increases by 4-5 percentage points for a one percentage point increase in the unemployment rate relative to the previous year. Turning to mechanisms, I investigate the role of UI take-up — rather than ineligiblity —in driving the observed pattern. Motivated by a measurement error framework and drawing on additional survey data, I argue that UI take-up behavior plays a key role in explaining the pattern of UI receipt, while characteristics of the unemployed together with potential ineligibility explain only about 1/3 of the variation with labor market conditions. Comparing the documented parameters of UI receipt with counterfactual scenarios of take-up behavior highlights the importance of take-up in influencing the de-facto generosity of UI.

Work in Progress

Career Blocker

(with Gökay Demir)

Abstract (click to expand): Internal promotions are an important source of wage growth, especially for workers who are initially trained in the firm - often blue-collar workers with no college degree. What happens to these workers when internal promotions, especially to top positions, become more difficult? First, we document a decline in the probability of being hired internally into top positions for initial apprentices over a long period of time in Germany using administrative employer-employee data. In contrast to standard wage-ladder models, in which a decline in internal promotion prospects is offset by an increase in an individual's prospects of being hired externally, we show a large and increasing role of firm components in external vs. internal hiring. While for some firms a high proportion of individuals are promoted internally and externally, an increasing number of firms offer neither internal nor external promotion prospects. We use a difference-in-differences event study approach to understand the impact of a shift in a firm's hiring policy from internal to external hiring for top positions on workers in positions below the top. We find that such a shift is associated with a decrease in the probability of workers reaching the top position and an increase in the probability of workers leaving the firm. In ongoing work, we aim to causally identify these effects and relate our causal estimates to recent trends in the German wage structure.

Publications

2024

The Speed of Earnings Responses to Taxation and the Role of Firm Labor Demand

(with Matthew Gudgeon)

Abstract (click to expand): This paper studies the speed at which workers’ pre-tax earnings respond to tax changes along the intensive margin. We do so in the context of Germany, where a large notch in the tax schedule induces sharp bunching in the earnings distribution. We analyze earnings responses to two policy reforms that shift this notch outward and find clear evidence that frictions delay the earnings responses of over 38% of workers. We propose that heterogeneity in firm labor demand plays a key role in generating the observed differences in the speed of workers’ earnings responses and provide supporting evidence.

• Final Draft (Ungated)

• Earlier IZA Discussion Paper

The Gender Gap in Earnings Losses after Job Displacement

(with Hannah Illing and Johannes Schmieder)

Abstract (click to expand): We compare men and women who are displaced from similar jobs by applying an event study design combined with propensity score matching and reweighting to administrative data from Germany. After a mass layoff, women’s earnings losses are about 35% higher than men’s, with the gap persisting five years after displacement. This is partly explained by women taking up more part-time employment, but even women’s full-time wage losses are almost 50% higher than men’s. Parenthood magnifies the gender gap sharply. Finally, displaced women spend less time on job search and apply for lower-paid jobs, highlighting the importance of labor supply decisions.

• Final Draft (Ungated)

• Web Appendix

• Earlier Discussion Paper

The Effects of Unemployment Insurance Caseworkers on Job Search Effort

(with Amelie Schiprowski, Julia Schmidtke and Johannes Schmieder)

Abstract (click to expand): We combine a high-frequency survey on job search effort with administrative data on caseworker interactions from the German unemployment insurance system to estimate how the dynamics of search effort respond to caseworker meetings and vacancy referrals. Meetings alone do not increase individuals’ time on search beyond a mechanical meeting-day effect; however, we find suggestive evidence that they do when combined with a formal contract on job search obligations. Referrals lead to a modest increase in effort over the three weeks following the event. Our findings leave room for caseworkers affecting employment outcomes through other channels, e.g. by altering search effectiveness.

• Final Draft (Ungated)

2022

Evidence on Job Search Models form a Survey of Unemployed Workers in Germany

(with Stefano DellaVigna, Jörg Heining and Johannes Schmieder)

Abstract (click to expand): The job-finding rate of unemployment insurance (UI) recipients declines in the initial months of unemployment and then exhibits a spike at the benefit exhaustion point. A range of theoretical explanations have been proposed, but those are hard to disentangle using data on job finding alone. To better understand the underlying mechanisms, we conducted a large text-message-based survey of unemployed workers in Germany. We surveyed 6,349 UI recipients twice a week for four months about their job search effort. The panel structure allows us to observe how search effort evolves in individuals over the unemployment spell. We provide three key facts: (i) search effort is flat early on in the UI spell, (ii) search effort exhibits an increase up to UI exhaustion and a decrease thereafter, (iii) UI recipients do not appear to time job start dates to coincide with the UI exhaustion point. A standard search model with unobserved heterogeneity struggles to explain the second fact, and a model of storable offers is not consistent with the third fact. The patterns are well captured by a model of reference-dependent job search or by a model with duration dependence in search cost.

• Final Draft (Ungated)

• Web Appendix

• Replication Code

Job Search during a Pandemic Recession: Survey Evidence from the Netherlands

(with Maria Balgova, Christian Zimpelmann and Nico Pestel)

Abstract (click to expand): This paper studies job search behavior in the midst of a pandemic recession. We use longrunning panel data from the Netherlands (LISS) and complement the core survey with our own COVID-specific module, conducted in June 2020, surveying job search effort of employed as well as unemployed respondents. We estimate an empirical model of job search over the business cycle over the period 2008-2019 to explore the gap between predicted and actual job search behavior in 2020. We find that job search during the pandemic recession differs strongly from previous downturns. The unemployed search significantly less than what we would normally observe during a recession of this size, while the employed search mildly more. Expectations about the duration of the pandemic seem to play a key role in explaining job search effort for the unemployed in 2020. Furthermore, employed subjects affected by changes in employment status due to COVID-19 are more likely to search for a job. Conversely, beliefs about infection risk do not seem to be related to job search in a systematic way.

• Final Draft (Ungated)

2020

Disincentive Effects of Unemployment Benefits and the Role of Caseworkers

(with Johannes Schmieder)

Abstract (click to expand): A large literature has documented that the unemployment duration of unemployment insurance (UI) recipient increases with the generosity of the UI system. This has been interpreted as the disincentive effect of UI benefits, however, unemployed workers typically also have caseworkers assigned who are monitoring and assisting the job search efforts. These caseworkers may respond to differences in UI eligibility by shifting resources (financial or time) between unemployed individuals in order to counteract the moral hazard effect of UI benefits or in order to focus resources to where they have the largest effect. This suggests that the typical estimates of the disincentive effects of UI may be biased in studies that compare workers within the same UI agency. We estimate whether caseworkers respond to the generosity of UI using a regression discontinuity (RD) design in Germany, where potential UI durations vary with age. We show that across a wide variety of measures, such as meetings, sanctions, and training programs UI caseworkers do not treat unemployed with different eligibility differently. At best we find a very small effect that workers with shorter eligibility close to the exhaustion point are more likely to be assigned to training programs that prolong their UI eligibility. The typical RD estimates of the UI disincentive effects thus seem to be valid estimates.

• Final Draft (Ungated)

• Web Appendix