Social Exchange and dynamic effects of voluntary employee representation (with Kornelius Kraft), Academy of Management Proceedings, 2021, 1, 14650.
Bargaining Power and the Labor Share – a structural break approach (with Kornelius Kraft), SFB 823 Discussion Paper No. 12/2021.
Abstract: In this paper we investigate the relevance of bargaining institutions in the decline in labor share. Several explanations for the decline exist, which consider the relevance of technology, globalization and markups. Surprisingly neglected so far, however, is the influence of bargaining institutions, in particular with a focus on changes in the outside option. We provide evidence of this issue, using the Hartz IV labor market reform in Germany as an exogenous shock in the wage bargaining of employees, and investigate its impact on the labor share. We begin by developing a theoretical model in which we outline the effect of a decrease in the outside option within a wage bargaining framework. Thereafter, the approach is twofold. Combining the EU KLEMS and Penn World Table databases, we first endogenously identify the Hartz IV reform as a significant structural break in the German labor share. Second, we estimate the effect of the Hartz IV legislation on the aggregated labor share using a synthetic control approach in which we construct a counterfactual Germany doppelganger. Finally, we use rich firm-level panel data compiled by Bureau van Dijk to support our results on the aggregated labor share. We find that the reform decreases the labor share by 1.6 – 2.7 percentage points depending on method and aggregation level. The synthetic control approach furthermore provides evidence that this effect is persistent over time since the reform.
Abstract: This paper investigates the impact of the implementation of a new workplace technology on worker outcomes such as overtime, training and perceived productivity. While the effects of new technologies on firm outcomes are widely discussed, the impact on workers still remains debated. Detailed worker-level data for Germany allows us to compare the outcomes for workers which are exposed to a change in workplace technologies to the group of workers which are not exposed in the periods before and after the introduction. Moreover, we exploit the perception of the new technology by employees to determine the dependency of the effects on this dimension of heterogeneity. Our estimates imply strongest impacts of new technologies in the first year of the implementation for overtime, training and perceived productivity. In addition, we show that the positive effects of a new technology vanish after the introduction period. Finally, changes in worker outcomes are dependent on the nature of the introduced technology. Positive effects on real worker outcomes therefore primarily occur when workers also tend to perceive it.
Social Exchange and dynamic effects of voluntary employee representation (with Kornelius Kraft [Among the best papers in the 2021 Academy of Management (AOM) meeting program]
Abstract: In this paper we address the question how non-monetary incentives contribute to labor productivity in German establishments. We consider involvement practices provided by the management such as round table conferences or employee spokespersons as non-monetary incentives for the alignment of interests between management and workers. We draw on the social exchange theory and provide a simple model which relates the concept of reciprocity to workers’ utility and effort. The empirical analysis is based on rich establishment level data in which the panel structure allows us to follow establishments over time. Using a dynamic difference-in-differences approach, we estimate introduction effects as well as effects over time. To mitigate selectivity issues, we augment the regression framework with matching algorithms. Our study provides evidence of a positive association between productivity and voluntary involvement that does not arise in the introduction period but rather in the long run. In addition, the data supports the narrative, that social exchange relations are more prevalent in small and owner-managed establishments in which the relationship between management and workers tend to be closer.
The Effects of Reforming a Federal Employment Agency on Labor Demand (with Kornelius Kraft), IZA Discussion Paper No. 14629
Abstract: In this paper we report the results of an empirical study on the employment growth effects of a policy intervention, explicitly aimed at increasing placement efficiency of the Federal Employment Agency in Germany. We use the Hartz III reform in the year 2004 as an exogenous intervention that improves the matching process and compare establishments that use the services of the Federal Employment Agency with establishments that do not use the placement services. Using detailed German establishment level data, our difference-in-differences estimates reveal an increase in employment growth among those firms that use the agency for their recruitment activities compared to non-user firms. After the Hartz III reform was in place, establishments using the agency grew roughly two percentage points faster in terms of employment relative to non-users and those establishments achieve an increase in the proportion of hires. We provide several robustness tests using for example inverse-probability weighting to additionally account for differences in observable characteristics. Our paper highlights the importance of the placement service on the labor demand side, in particular on the so far overlooked establishment level
Employee representation and innovation – disentangling the effect of legal and voluntary representation institutions in Germany (with Kornelius Kraft), SFB 823 Discussion Paper No. 4/2019
Abstract: This paper studies the effect of voluntary employee representation (VER) initiated by the management on product and process innovations on the establishment level. In contrast to statutory forms of co-determination such as works councils, participative practices initiated by management are not equipped with any legally granted rights at all. Using very comprehensive German panel data on the establishment level, we are able to compare both types of representation and differentiate our analysis into incremental and radical product as well as process innovations. Results show that employee representation provided voluntarily by management, increases the likelihood for both product (incremental and radical) as well as process innovations. For works councils we find at least evidence for a negative impact on radical product innovation. Moreover, our results point to a substitutive relationship between both types of employee representation. Endogeneity is taken into account by applying recursive multivariate probit models in combination with exclusion restrictions.
Selected Work in Progress
- Introduction and dissolution of voluntary employee representation in times of crisis