Research

Working Papers

Regional Occupations, Local Rents and Worker Mobility (JMP)

Despite large regional wage differences, worker mobility is low in Germany and other developed economies. This paper argues that low mobility arises from the interaction between locally accumulated, region-specific human capital and high regional living costs. Using German social security records, I document that workers in high-wage regions have better careers but not higher entry wages, despite higher living costs. I show that large parts of variation in regional wage levels and growth can be accounted for by different regional occupation compositions. I develop a general equilibrium lifecycle model with two regions, local labor and rent markets, and borrowing constraints in which human capital accumulation reflects the skills most in use in a worker’s local labor market. I find that in the calibrated model, young workers are kept from moving to the region with larger wage growth by high rent prices. Older workers with more experience have low incentives to move because, on average, their human capital would be mismatched if they did. I show that constructing more housing in the high-wage region leads to more mobility and is welfare-improving for workers in both regions. Download (PDF)

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

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. Download (PDF) Extended Abstract (PDF)

Work in Progress

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

with Hannah Illing, Hanna Schwank and Leonie Wicht

As climate change increases the frequency and geographic reach of natural disasters, understanding their economic consequences in previously unaffected regions becomes increasingly important. We study the medium-run labor market and mobility effects of two major floods in Germany using administrative data and a dynamic difference-in-differences design. While disasters often imply economic disruption, we find that affected individuals—especially those whose home and workplace were both flooded—experienced sustained gains in employment and earnings. These effects appear to be driven by reconstruction efforts and local demand shocks. In contrast, individuals whose home alone was affected saw delayed reductions in labor supply. We also document limited residential mobility and signs of structural change in local economies. Future work will incorporate the 2021 flood and refined geospatial measures. Preliminary Draft (PDF)