Institut für Volkswirtschaftslehre

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Bidirectional relationship between investor sentiment and excessreturns : new evidence from the wavelet perspective
(2015) Marczak, Martyna; Beißinger, Thomas
This paper sheds new light on the mutual relationship between investor sentiment and excess returns corresponding to the bubble component of stock prices. We propose to use the wavelet concept of the phase angle to determine the lead–lag relation between these variables. The wavelet phase angle allows for decoupling short– and long–run relations and is additionally capable of identifying time–varying comovement patterns. By applying this concept to excess returns of the monthly S&P500 index and two alternative monthly US sentiment indicators we find that in the short run (until 3 months) sentiment is leading returns whereas for periods above 3 months the opposite can be observed.
Competitiveness at the country-sector level : new measures based on global value chains
(2018) Beißinger, Thomas; Marczak, Martyna
We propose the so-called domestic “embodied unit labor costs” (EULC) at the country-sector level as a new cost-related basis for measures of international competitiveness. EULC take into account that a sector’s labor costs constitute only a small share of its total cost which to a large extent consist of expenses for inter- mediate goods from other sectors. In line with a simple Leontief-type model, the proposed measure is constructed as a weighted average of unit labor costs of all do- mestic sectors contributing to the final goods of a specific sector. The contribution is expressed in value-added terms and takes global supply chains into account. We also show how EULC can be consistently calculated for sectoral aggregates such as the tradable goods sector. Based on EULC we propose the “embodied real effec- tive exchange rate” (EREER) at the country-sector level as a new competitiveness indicator where the relevance of trading partners is quantified by an appropriate value-added measure. The chosen value-added concept replaces gross exports tra- ditionally used as the weight basis in effective exchange rates. Using the World Input-Output Database (WIOD) we employ the proposed indicators to shed new light on changes in cost competitiveness at the sectoral level for Germany, and compare the empirical evidence with selected other euro area countries.
Divergence in labour force growth : should wages and prices grow faster in Germany?
(2020) Marczak, Martyna; Hellier, Joël; Beißinger, Thomas
We develop a model which shows that wages, prices and real income should grow faster in countries with low increase in their labour force. If not, other countries experience growing unemployment and/or trade deficit. This result is applied to the case of Germany, which has displayed a significantly lower increase in its labour force than its trade partners, except in the moment of the reunification. By assuming that goods are differentiated according to their country of origin (Armington’s hypothesis), a low growth of the working population constrains the production of German goods, which entails an increase in their prices and in German wages. This mechanism is magnified by the low price elasticity of the demand for German goods.Hence,the German policy of wage moderation could severely constrain other countries’ policy options. The simulations of an extended model which encompasses offshoring to emerging countries and labour market imperfections suggest that (i) the impact of differences in labour force growth upon unemployment in Eurozone countries has been significant and (ii) the German demographic shock following unification could explain a large part of the 1995-2005 German economic turmoil.
Essays on the impact of temporary agency work on wages and employment
(2018) Baudy, Philipp; Beißinger, Thomas
The thesis contributes to the theoretical discussion of the effects of temporary agency work and picks up three different issues that have not been analyzed yet. It provides three theoretical models 1) to discuss the optimal economic behavior of firms and labor unions when firms threaten to use temporary agency employment in the bargaining process, 2) to examine the macroeconomic effects of the deregulation of temporary agency work that took, and still takes, place in many countries in the last decades, and 3) to study how the technological choice of firms in the economy changes due to the legal deregulation of temporary agency work. The first model focuses on the question of the optimal economic behavior of the bargaining parties. Developing a monopoly union model, it analyzes how and to what extent firms can strategically use the threat of temporary agency employment to dampen the wage claims of labor unions. Furthermore, the model discusses how labor unions optimally behave and respond to these threats. It is shown that labor unions may find it optimal to accept lower wages to prevent firms from using temporary agency workers. The decision of the labor union to oppose or accept the firms threat is based on the attempt to minimize the loss in its utility. While labor unions suffer from the potential use of temporary agency employment in terms of their utility, firms gain from increasing profits and an extended employment level per firm. If unions do not oppose temporary agency work, the model suggests that labor unions increase their wage claims for the remaining regular workers to a level that even exceeds the claims of the labor union if there is no threat at all. Hence, an intensive use of temporary agency workers in high-wage firms may be the cause and not the consequence of the high wage level in those firms. The second model concentrates on the effects of the deregulation of temporary agency employment on macroeconomic determinants like wages, unemployment, and the employment structure. Using the matching framework, it provides a first contribution that combines labor unions and temporary agency work in this modeling setup. Large firms produce differentiated goods employing regular workers that are organized in labor unions and, optionally, using temporary agency work for parts of the production. Furthermore, there is a special emphasis on the flows from temporary agency to regular employment, which is modeled as on-the-job search. The model shows that the deregulation of temporary agency work leads to a reduction in overall unemployment. Surprisingly, this favors regular employment due to lower wages that arise from the impact that the more attractive production alternative temporary agency employment has on labor union wage bargaining. The most interesting finding, however, is that there is a hump-shaped relationship between the degree of institutional deregulation of temporary agency work and its rate of employment. This is explained by the fact that voluntary non-institutional, firm-level regulations come into play and get the more important, the less regulated temporary agency employment is. They have a counter-effect on the costs of temporary agency work that is lowered by the deregulation. Additionally, even if the model does not conceal that individual workers suffer from declining wages, it shows that regular employment benefits from the deregulation of temporary agency employment. The third model examines how the technological choice of firms in an economy changes due to the availability of temporary agency employment as a production alternative that gets cheaper and, therefore, more attractive the less regulated it is. The model uses the matching framework with two types of jobs that differ in their productivity and workers that are randomly matched with temporary or regular job vacancies. The analysis reveals how the decision of firms with which technology to enter the market and to produce with changes with the deregulation of temporary agency employment. Regular and temporary agency workers produce the same good but use different technologies. Temporary agency work is less expensive to hire than regular workers as direct labor costs are lower. However, job destruction and labor turnover is higher in this employment type. The model rather intuitively suggests that the legal deregulation of temporary agency employment deteriorates the technology level used in the economy, leads to a more intensive use of the less advanced technology, and increases temporary agency employment. Regular workers are shown to suffer from declining wages while the labor income of temporary agency workers increases. However, the model also provides an advice for economic policy by suggesting that subsidies or other forms of support for directed investments in technological progress of more advanced technologies may be suitable to dampen the macroeconomic effects of the deregulation of temporary agency employment.
Four essays in the empirical analysis of business cycles and structural breaks
(2015) Marczak, Martyna; Beißinger, Thomas
Business cycle analysis has a long history in the macroeconomics literature and since its origins it poses a challenge for both empirical and theoretical research. The enduring interest in this research area is dictated by its high relevance for economic policy. Reliable information on the state of the economy plays a crucial role in the monitoring of the economy and in the policy-making process. This involves the choice of the method for extraction of a proper business cycle indicator. Moreover, the business cycle analyst also has to take account of structural breaks as well as seasonal and higher frequency movements of the series that can affect the properties of a business cycle indicator. Another reason for the keen interest in empirical business cycle research can be seen in the need to validate theoretical approaches. A prominent example is the debate on the cyclical behavior of real wages which evolved to one of the most lively and long--lasting debates in macroeconomics. This thesis tries to contribute to the literature under the aforementioned aspects. It offers a new methodological perspective with respect to the extraction of business cycles and detection of structural breaks. Furthermore, it sheds some light on the question of real wage cyclicality from the empirical point of view. The first essay proposes a new multivariate model based on a band-pass filter to construct business cycle indicators. Using this method and a dataset with monthly and quarterly US time series, two monthly business cycle indicators are obtained for the US. It is shown that the proposed method not only reproduces historical recessions very well, but it also performs good in terms of forecasting. The second essay for the first time in the literature combines indicator saturation as a general-to-specific approach to detect outliers and structural breaks with the structural time series model for the purpose of seasonal adjustment. The performance of the impulse-indicator and step-indicator saturation for detecting additive outliers and level shifts is tested in both a comprehensive Monte Carlo simulation exercise and an empirical application. The latter involves five European industrial production series. Its focus lies on the question whether the recessionary episode starting towards the end of 2008 can be described by the inherent model dynamics, or whether it represents a major structural change. In the third essay, stylized facts about the cyclicality of real consumer wages and real producer wages in Germany are established. First, various detrending methods are applied to estimate a business cycle and real wage cycles. The comovements between real wage cycles and the business cycle are then examined both in the time domain and in the frequency domain by resorting to the concept of the phase angle. According to the frequency domain results, the consumer real wage lags behind the business cycle. Moreover, it exhibits an anticyclical behavior in the short run, whereas in the longer run a procyclical behavior can be observed. For the producer real wage, in contrast, the results in the frequency domain are not clear-cut. The fourth essay compares the cyclical behavior of consumer and producer real wages in the USA and Germany. This study is the first one which employs wavelet analysis as a comovement tool in the context of the examined research question. From the findings of this study it can be inferred that the USA and Germany differ with respect to the lead-lag relationship of real wages and the business cycle. In the USA, both real wages are leading the business cycle in the entire time interval. The German consumer real wage is, on the other hand, lagging the business cycle. For the German producer real wage, the lead-lag pattern changes over time. In addition, the results show that real wages in the USA as well in Germany are procyclical or acyclical until 1980 and countercyclical thereafter.
Four essays on the impact of institutions, technological change, and globalization on labor market outcomes
(2019) Cords, Dario; Beißinger, Thomas
The thesis picks up some modern labor market phenomena and contributes to the literature by developing four theoretical models to analyze the effects on labor market outcomes. In particular, it 1) examines how the decision of labor unions to merge or to stay independent depends on the degree of product differentiation, 2) investigates the macroeconomic effects of the deregulation of temporary agency employment, 3) discusses if low-skilled workers will be substituted by automation, and 4) studies how the technological choice of firms in an economy changes due to low-skilled immigration. The first model focuses on the question of the optimal economic behavior of labor unions under multi-unionism. Developing a right-to-manage model, it analyzes how the decision of labor unions to merge or to stay independent depends on the degree of product differentiation. The model predicts that labor unions have strict incentives to merge if the products are substitutable in consumption, while they want to stay separated for complementary products. The second model studies the effects of the deregulation of temporary agency employment on labor market outcomes such as wages, unemployment, and the employment structure. It develops a search and matching model with large firms that produce differentiated goods using regularly employed workers that are organized in labor unions and, in addition, temporary agency workers that may search on-the-job for regular employment. The model shows that the legal deregulation of temporary agency employment increases overall employment and the rate of regular employment. The rate of regular employment increases, since labor unions reduce their wage claims in response to the deregulation of temporary agency employment. As the most surprising result, the model predicts a hump-shaped relationship between the degree of legal deregulation of temporary agency employment and its employment rate. This is explained by voluntary, non-institutional firm-level agreements that restrict the use of temporary agency employment in the production and get more important, the more deregulated temporary agency employment is. The third model incorporates automation in the search and matching framework to reveal if automation creates technological, skill-specific unemployment. The model assumes one-worker firms that operate in a low- or high-skill intensive intermediate sector and employ low- or high-skilled workers, respectively. The two intermediate goods, traditional capital and automation capital in form of industrial robots, 3D printer etc. are used for the production of a final good. Automation capital serves as a perfect substitute for low-skilled labor and an imperfect substitute for high-skilled labor. The model shows that the accumulation of automation capital leads to the creation of technological unemployment. While the unemployment rate of high-skilled workers decreases, low-skilled workers suffer and get replaced by automation capital. Further, the model predicts that wage inequality between high- and low-skilled workers rises as the wage rate of low-skilled workers declines, while the wage rate of high-skilled workers increases. The fourth model examines how the technological choice of firms in a host country change due to an exogenous inflow of low-skilled immigrants. It uses a search and matching model that considers two type of firms that either use a basic technology or a more advanced technology. Workers match with vacancies randomly and consist of three groups: low- and high-skilled natives and low-skilled immigrants. While the skill distribution of workers is exogenous, firms may endogenously adjust their skill requirements. Another feature of the model is that it captures educational mismatch of high-skilled natives. The model rather intuitively suggests that an increase in low-skilled immigration causes firms to change their behavior and to shift their production towards the basic technology. As a consequence, low-skilled natives benefit from the influx of low-skilled immigrants, while the wage rate of high-skilled natives decreases, whereas their employment rate goes up.
Offshoring and labour market reforms : modelling the German experience
(2015) Hellier, Joël; Beißinger, Thomas; Chusseau, Nathalie
A usual interpretation of the high performance of the German economy since 2005 is that the Hartz labour market reforms have boosted German competitiveness, resulting in higher exports, higher production and lower unemployment. This explanation is at odds with the sequence of observed facts. We propose and model an alternative scenario in which offshoring explains the gains in competitiveness but increases unemployment and inequality, and the subsequent labour market reforms lower unemployment by lessening the reservation wage and expanding the non-tradable sector. The model replicates the developments of the German economy since 1995: 1) Germany offshores more intensively than other advanced countries; 2) The increase in competitiveness and in the exports/production ratio occurs before the implementation of the labour market reform, and this comes with both higher inequality and higher unemployment; 3) The implementation of the reform reduces unemployment, but also decreases the exports/production ratio and increases inequality. The model also predicts that the reduction in unemployment in Germany would have occurred without the Hartz reforms, but later and less intensively. We finally discuss the possible extension of this ‘strategy’ to other Eurozone countries, and alternative policies that activate similar mechanisms without increasing inequality.
Recent developments in gender differences in pay
(2017) Töpfer, Marina; Beißinger, Thomas
Gender differences in pay continue to persist, despite decades of equal-pay legislation and the promotion of equal opportunities. This thesis examines differences in pay between men and women in Italy during the period 2005-2014 and puts special emphasis on the effects of sample selection. It decomposes the gender pay gap in different subsamples and identifies drivers of the gap that remained unobserved so far. In particular, it shows the empirical disappearance of the gender pay gap in Italy for public-contest recruited employees. It further reveals that the wage gap between men and women for overeducated workers is mainly explained by generally unobservable characteristics. From the methodological perspective, this work provides two novelties. First, it adds to the literature on quantile-regression approaches by adjusting the wage model based on unconditional quantile regression for sample selection. Second, an alternative estimation approach that builds on the omitted variable bias formula is proposed, in order to directly estimate the change of the gender pay gap and its components over time. The empirical part of this thesis is based on a large Italian data set (ISFOL PLUS 2005-2014). The case of Italy is particularly interesting for the study of gender differences in pay and gender-specific selection into wage work given low levels of the aggregate gender pay gap (approximately 6.0%) on the one hand, and high employment gaps between men and women (more than 20.0%) on the other hand.
Technical change, task allocation, and labor unions
(2022) Marczak, Martyna; Beißinger, Thomas; Brall, Franziska
We propose a novel framework that integrates the task approach" for a more precise production modeling into the search-and-matching model with low- and high-skilled workers, and wage setting by labor unions. We establish the relationship between task reallocation and changes in wage pressure, and examine how skill- biased technical change (SBTC) affects the task composition, wages of both skill groups, and unemployment. In contrast to the canonical model with a fixed task allocation, low-skilled workers may be harmed in terms of either lower wages or higher unemployment depending on the relative task-related productivity profile of both worker types. We calibrate the model to the US and German data for the periods 1995-2005 and 2010-2017. The simulated effects of SBTC on low-skilled unemployment are largely consistent with observed developments. For example, US low-skilled unemployment increases due to SBTC in the earlier period and decreases after 2010.
The impact of temporary agency work on trade union wage setting : a theoretical analysis
(2015) Baudy, Philipp; Beißinger, Thomas
Focusing on the cost-reducing motive behind the use of temporary agency employment, this paper aims at providing a better theoretical understanding of the effects of temporary agency work on the wage-setting process, trade unions’ rents, firms’ profits and employment. It is shown that trade unions may find it optimal to accept lower wages to prevent firms from using temporary agency workers. Hence, the firms’ option to use agency workers may affect wage setting also in those firms that only employ regular workers. However, if firms decide to employ agency workers, trade union wage claims will increase for the (remaining) regular workers. An intensive use of temporary agency workers in high-wage firms may therefore be the cause and not the consequence of the high wage level in those firms. Even though we assume monopoly unions that ascribe the highest possible wage-setting power to the unions, the economic rents of trade unions decline because of the firms’ option to use temporary agency work, whereas firms’ profits may increase.
Three essays in empirical economics
(2019) Seiffert, Sebastian Daniel; Beißinger, Thomas
In the preface of one of the most established textbooks "Economics" by Samuelson and Nordhaus (1998), the authors state that the ultimate goal of economics is to improve the living conditions of people in their everyday life". In this spirit, the underlying thesis empirically assesses three heterogenous topics which all can be linked via their impact on (economic) well-being. It contributes to the scientific landscape by tackling the questions at hand utilising novel and newly constructed data sets which have not been commonly used in economic research. The thesis comprises three chapters which will be summarised in the following. Gun Violence in the US: Correlates and Causes This chapter provides a county-level investigation of the economically-motivated gun violence in the US. To guide our empirical analysis, we develop a simple theoretical model which suggests that firearm-related robberies in a given county increase with the number of illegal guns and decrease with social capital and police intensity. Using detailed FBI data from 1986-2014, we find empirical evidence for the role of illegal guns, social capital, and police intensity in line with our theoretical predictions. To investigate the causal effect of illegal guns, we exploit plausibly exogenous variation in illegal firearm supplies due to gun thefts in contiguous states. The Size of the Middle Class and Educational Outcomes: Theory and Evidence from the Indian Subcontinent This chapter proposes a stylised model to derive the effect of a sizeable middle class on average educational outcomes. Under the reasonable assumptions, the model predicts that the spending share on education increases if the middle class becomes larger such that the size of the middle class has a positive impact on education. We test the relationship empirically by using village/neighbourhood level data from Indian household surveys. To tackle the the issue of potential endogeneity of the middle class share of the population, we propose a novel instrument that relies on the fraction of the population belonging to the third (middle) caste ("sudra"). Using this IV strategy, our empirical results support a positive effect. Go East: On the Impact of the Transsiberian Railway on Economic Development in Eastern Russia This chapter addresses the question whether or not large-scale infrastructure investments have a causal effect of local economic development. By using a novel instrumental variable approach based on historical trade and travel routes across the Russian East, I am able to identify a causal and negative effect of remoteness to the Transsiberian Railway on local economic activity as measured by nocturnal lights emission.
Three essays on the labor market effects of technological change and unemployment benefits
(2023) Brall, Franziska; Beißinger, Thomas
The dissertation essentially contributes to the discourse on how technological change and a reduction in unemployment benefits affect the labor market. The thesis incorporates an empirical analysis of the influence of automation technologies on wage inequality in Germany. Additionally, the dissertation introduces a novel general equilibrium model to analyze the impact of technological change on the wage setting behavior of labor unions and reevaluate the labor market effects of a cut in unemployment benefits. The first essay contributes to the existing literature in examining the relative importance of automation technologies on wage inequality in the German manufacturing sector between 1996 and 2017. The analysis introduces a novel measure of automation threat, combining occupation- and requirement-specific scores of automation risk with sector-specific robot densities. Using the RIF-based Oaxaca–Blinder decomposition method, the analysis demonstrates that automation threat significantly contributes to wage inequality, in addition to the commonly used demographic factors. On the one hand, there is an observable trend towards occupations with medium automation threat, accompanied by decreasing shares of occupations with high and low automation threat. Due to the fact that within-group wage inequality is the lowest in the group with the highest automation threat, those compositional changes contribute to increasing wage inequality. On the other hand, an increasing wage dispersion between occupations with low automation threat (containing especially non-routine tasks) and occupations with high automation threat (containing especially routine tasks) contributes to rising wage inequality. This is in line with the predictions of routine-biased technical change, where technology particularly substitutes routine tasks. The second essay develops a novel modeling framework for the analysis of skill-biased technical change (SBTC), combining the task approach, wage setting by labor unions, as well as search and matching frictions. The important insight from this analysis is that changes in the firm’s assignment of tasks to low- and high-skilled workers have an impact on the wage setting power of labor unions. The effect of such a change in the task allocation on the labor demand elasticity, and consequently on the labor union’s wage markup, is ambiguous. This has consequences for the effects of SBTC. Unlike the conventional result that SBTC has a positive impact on employment and wages of low-skilled workers, the task-based matching model presents the possibility that low-skilled workers may instead experience either higher unemployment or lower real wages. The model is calibrated to German and French data for the periods 1995-2005 and 2010-2017 to illustrate that the impact of SBTC may even change its sign over time. The results depend on the shape of the task productivity schedule, which reflects the substitutability of high-and low-skilled workers. The third essay revisits the labor market effects of a reduction in unemployment benefits using a modified version of the previously developed task-based matching model. The analysis demonstrates that a cut in low-skilled unemployment benefits triggers a reallocation of tasks towards low-skilled workers. This leads to additional effects on labor market outcomes that are disregarded in the prevailing literature. To highlight the importance of endogenous task allocation, the task-based matching model with exogenous and constant task allocation is considered. Both model variants are calibrated to analyze the effects of the Hartz IV reform in Germany, which involved a substantial cut in unemployment benefits. The calibration reveals a remarkable decrease in the low-skilled unemployment rate by 4 percentage points resulting from Hartz IV. In the case of exogenous and constant task allocation, the decline is limited to 3.4 percentage points, but there are stronger effects on low- and high skilled wages, causing wage inequality to rise more sharply. The results emphasize the importance of considering endogenous task allocation in the evaluation of labor market reforms.
Three essays on wage inequality in Germany : the impact of automation, migration and the minimum wage
(2023) Schmid, Ramona Elisabeth; Beißinger, Thomas
Economic inequality has increased in the majority of countries worldwide over the last three decades and is highly present in public discussion, political debate and scientific research. Due to the large number and complexity of driving forces behind changes in wage inequality, this cumulative dissertation focuses on three challenges of the German labour market. The first paper addresses the question to which extent automation and robotization impact wage inequality in the manufacturing sector in Germany between 1996 and 2017. Applying decomposition analyses along the entire wage distribution, driving factors behind changes in wage inequality are identified. On the basis of administrative data and a new introduced measure of automation threat, which combines occupation- and requirement-specific scores of automation risk with yearly sector-specific robot densities, the study provides new evidence to existing literature. Besides the traditional factors education and age, the detailed decomposition analysis provides evidence that automation threat contributes significantly to rising wage inequality. On the one hand, changes in the composition of the workforce that is exposed to automation and robotization led to significant increases in wage inequality in the German manufacturing sector during the last two decades. On the other hand, evidence of a growing wage dispersion between occupations with low automation threat (especially associated with non-routine tasks) and occupations with high automation threat (especially associated with routine tasks) is revealed. This trend contributes to rising wage inequality as predicted by routine-biased technological change. The second research study presents new evidence on immigrant-native wage differentials in consideration of regional differences between metropolitan and non-metropolitan areas between 2000 and 2019 in Germany. Since gaps in remuneration provide information on the effectiveness of immigration and labour market policies as well as identify the degree of economic integration of foreign workers, the analysis is currently of great importance. Using administrative data, aggregate decomposition results support the hypothesis that the majority of wage differentials can be explained by differences in observed characteristics. However, overall wage differentials at the median exhibit an increasing trend, and on average higher gaps in remuneration are revealed in urban areas. Detailed decomposition analyses show that the effects of explanatory factors not only change over time but the sources of gaps also vary along the wage distribution. Decisive explanatory variables in this context are the practised profession, the economic sector affiliation and labour market experience. Distinguishing between metropolitan and non-metropolitan areas provides evidence that especially differences in educational attainment impact immigrant-native wage gaps in urban areas. The third paper evaluates the effects of the introduced national minimum wage in 2015 on the gender wage gap in Germany. Being confronted with a low-wage sector of considerable extent and comparably high wage differentials between men and women, this study on Germany provides necessary new insights in this area of research. On the basis of administrative data and counterfactual difference-in-differences analyses significant decreases of wage gaps between men and women that can be traced back to the introduced statutory wage floor are revealed. Especially at the lowest observed wage level and in the East of Germany the highest decreases are observable. The analysis, differentiated by educational level, age and occupational activity, provides detailed information on the effectiveness of the wage floor for different target groups. In particular, at lower wage levels for the least educated and middle aged workers the introduction of the minimum wage is the driving factor that significantly lowers group-specific gender wage gaps. Counterfactual decomposition analyses finally provide first evidence that in the West of Germany possible discrimination against women at the lowest wages is restricted by the wage floor.

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