Research

Given global efforts to reduce carbon emissions, the shift of labor away from carbon-intensive activities is likely to increase. To shed light on the implied adjustment costs for workers, we use German administrative data from 1992 to 2020 to estimate the cost of involuntary job displacement for workers in high-carbon-intensity (HCI) sectors. Germany is particularly well-suited for this endeavor, as it has been one of the leading countries in carbon emission reductions since 1990, with considerably declining employment in HCI sectors. Comparing labor market outcomes of displaced and non-displaced workers before and after a mass layoff event, we find that workers displaced from HCI sectors face larger and more lasting earnings losses than those displaced from other sectors. This is mainly due to lower wages after re-employment. We show that a large part of the gap in displacement costs is explained by persistent differences in occupation-, firm- and local labor market-related characteristic across sectors, while differences in worker characteristics play a more limited role. Production processes in HCI sectors are regionally concentrated and involve a specific set of occupations and tasks, while firm wage premia are higher. This reduces outside options for finding jobs with similar skill requirements and pay, increasing adjustment costs for displaced workers. Using an alternative method to identify involuntary job separations, we show that our results also apply to more gradual transitions, signaling that adjustment costs could remain significant in a green transition without mass-layoffs. 

Our paper documents the importance of ex ante worker heterogeneity for labor market dynamics and for the composition of the unemployment pool over the business cycle. In recessions, the unemployment pool shifts toward workers with higher wages in their previous jobs. Based on administrative data for Germany and two-way worker and firm wage fixed effects, we show that this shift is mainly connected to worker heterogeneity, not to firm heterogeneity. We calibrate a search and matching model with ex ante worker heterogeneity to the estimated relative residual wage dispersion across worker fixed-effect groups. We show that a lower idiosyncratic match-specific shock dispersion for high-wage workers is key for the larger relative fluctuations of their separation rate as well as for the positive comovement between prior wages and fixed effects of unemployed workers with aggregate unemployment. We argue that firm-based explanations, such as cyclical financial frictions, are unlikely to be key drivers for the documented empirical patterns.  

Civil society has played an important role in meeting the challenges of refugee migration in recent years. This commentary documents the importance of civic engagement for the integration of refugees by linking individual survey data on refugees to a regional measure of civic engagement in Germany. Using the density of newly established civic associations at the county level as a measure of civic engagement, we exploit regional differences in civic engagement in order to estimate its association with refugee integration outcomes. We find that in regions with particularly high levels of civic engagement, refugees have significantly more frequent contact to Germans, higher life satisfaction, and better German language skills. This correlation is robust to regional contextual factors such as the local population structure, economic strength, and the state of the labor market. In terms of language acquisition, women and refugees with a low level of education benefit the most from high civic engagement. Moreover, refugees with university degrees find significantly better-paying jobs in areas with higher civic engagement. However, no direct correlation could be established between civic engagement and the likelihood that refugees are employed. Nonetheless, the results suggest that support from civil society translates into improved access to government benefits. Our findings highlight that local civic engagement is an important complement to public assistance services and policy makers should give a high priority to partnering with the civil society to improve refugees’ integration outcomes. 

We quantify the role of gender-specific firm wage premiums in explaining the private-sector gender gap in hourly wages using a harmonized research design across 11 matched employer-employee datasets — ten European countries and Washington State, USA. These premiums explain the gender gap when women are less likely to work at high-paying firms (sorting) or receive lower premiums than men within the same firm (pay-setting). We find that firm wage premiums account for a substantial share of variation in gender wage gaps, ranging from 15 to 32 percent. While both mechanisms matter, sorting is the predominant driver of the firm contribution to the gender wage gap in most countries. Three patterns are broadly consistent: (1) women sorting into lower-paying firms becomes increasingly pronounced with age; (2) women are more concentrated in low-paying firms with a high share of part-time workers; and (3) pay-setting gaps are largest in high-wage firms, where women receive about 90 percent of the rents men receive from firm surplus gains. 

We study the incidence, sources, and dynamics of low-wage employment using harmonised linked employer-employee administrative data from Denmark, France, Germany, the Netherlands, Portugal, and the United Kingdom. We examine how worker characteristics, firm-specific wage premia, wage progression, and labour market institutions shape outcomes at different parts of the lower wage distribution. Three main findings emerge. First, worker characteristics account for most of the wage gap facing low-wage workers, though firm-specific wage premia matter too, especially at the very bottom. Firm premia reflect both sorting across industries and pay differences across firms within industries. Second, low-wage employment is at least partly transitory, as workers at the bottom see faster subsequent wage growth and change firms more often. Third, minimum wages and marginal effective tax rates show limited systematic association with wage growth or job-to-job mobility, though higher minimum wages are linked to a smaller share of workers below 70 % of the median. These patterns are broadly similar across countries and point to the joint importance of worker skills and access to higher-paying firms for improving low-wage workers' prospects. 

This paper studies regional disparities in the cost of job loss. Based on the case of East and West Germany,  I document that, despite worse labor market conditions in the East, earnings losses of displaced workers are on average 21% smaller in East Germany compared to West Germany. The West-East gap in earnings losses can be accounted for by differences in the local mix of job destruction. One third of the gap reflects a shift in job destruction in the East away from manufacturing and towards construction following the early reunification period. The remaining two thirds reflect smaller earnings losses in the East within industries, which are linked to lower firm wage premia among East German employers. Structural effects - the earnings losses obtained by holding the local mix of job destruction fixed - allow identifying an earnings penalty for displaced workers in the East that is more in line with its weaker labor market performance. Although regional mobility can mitigate earnings losses, East Germans exhibit limited mobility following job loss, suggesting the presence of barriers to labor mobility.