Research

Working Papers

Local Unemployment, Worker Mobility and Labor Market Outcomes: Evidence from Germany

In most countries, there are large and highly persistent differences in unemployment rates across local labor markets. Such local unemployment rate differences can shape the career outcomes of young who start their careers in different local labor markets. I use high-quality administrative data from Germany to study how workers move between labor markets with different unemployment rates and their resulting lifecycle wage profiles. I find that on average workers who start their careers in lower unemployment regions earn higher wages even when young, experience greater wage growth along the lifecycle and spend less time in unemployment. Even conditional on local price levels and worker fixed effects, I find that between workers from high and workers from low unemployment regions an unexplained wage gap opens up to about 11\% until the age of 40. Despite this, I do not find that workers move out of bad labor markets and into good labor markets. Instead, workers spend most of their time in local labor markets with similar relative degrees of unemployment. I find that the differences in wages and unemployment translate into a gap of about 150,000 Euros (adjusted to 2010 level) in real income accumulated until the age of 55. Download (PDF) CRC TR 224 Working Paper

Work in Progress

Regional Occupations, Local Rents and Worker Mobility (JMP)

Regional wage disparities persist in Germany and other developed economies, yet worker mobility remains low. Using social security data, I show that while higher wages in expensive regions are offset by higher living costs for young workers, these regions offer significantly greater long-term wage growth. This divergence is not explained by worker sorting, but by differences in regional occupational structures. To account for these findings, I develop a spatial general equilibrium model with heterogeneous regional occupations, full worker lifecycles, and local housing and labor markets. In the model, workers face resource-moving costs, are borrowing-constrained and accumulate occupation-specific human capital over time. Wage growth varies across occupations and thereby regions. Delayed migration leads to increasing opportunity costs, creating a deadlock: young workers cannot move early because of borrowing constraints and high living costs, but waiting makes migration ever more costly. This mechanism explains low mobility despite large regional income differences.

Carrots or Sticks? Short-Time Work vs. Lay-off Taxes

with Gero Stiepelmann

While unemployment insurance systems are widely used to insure workers against income losses after lay-offs, it is well known that they can increase separations in the labor market. There are two common policy instruments that can counter this known problem: lay-off taxes and short-time work schemes. This study provides a Search and Matching framework to evaluate which of the two is the better policy tool. We show, that if only few firms are financially constrained, lay-off taxes are better because they do not distort working hours in the economy. With a large share of financially constrained firms, short-time Work emerges as the superior tool, as lay-off taxes lose their bite. Additionally, short-time work can help provide insurance against income losses to risk-averse workers that constrained firms can no longer provide in their wage contracts. Extended Abstract (PDF)

Mobility and the Labor Market Effects of Being Affected by a Flood Event

with Hannah Illing, Hanna Schwank and Leonie Wicht