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 effect of a reduction in the outside option within wage bargaining for the decline of the labor share in Germany. 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. Based on a theoretical model, we outline the effect of a decrease in the outside option. 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, i.e. policy intervention. Second, we estimate the effect of the Hartz IV legislation on the aggregate 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 using unemployment variation among German counties prior to the Hartz reforms as an identification strategy. We find that the Hartz IV reform decreases the labor share by on average two percentage points. The synthetic control approach furthermore provides evidence that this effect is lasting after the reform was implemented.
Abstract: This paper investigates the impact of the adoption of a new technology on worker outcomes. While the effects of new technologies on firm outcomes are widely discussed, the impact on workers remains debated. To investigate this relation, we exploit the implementation of a new workplace technology as a source of variation in employee outcomes. Using detailed worker-level data for Germany, we show that the strongest impacts of new technologies arise in the first year of its implementation for overtime, training and perceived labor intensity. These effects diminish after the introduction period. Finally, we show that changes in worker outcomes depend on the nature of the technology as well as occupational choices. Thus, we find that technologies are particularly affecting workers if their introduction is related to increases in workload and mental stress. In addition, workers in high-paying occupations are affected in all of the worker outcomes examined. Among employees in low- and mid-paying occupations, in contrast, there are only particularly strong impacts on overtime and training. The impact on worker outcomes therefore primarily occurs when the new technology shapes the work environment of the exposed worker.
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 of 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 that 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 and post-introduction effects. 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 during 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 tends 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 effects of voluntary employee representation on product and process innovations. In contrast to statutory forms of codetermination such as works councils, voluntary representation initiated by the management in the form of round table conferences or employee spokespersons is not equipped with any legally granted rights at all. We therefore examine how differences in bargaining power relate to innovative output. Using comprehensive German panel data, we compare both types of representation institutions and differentiate our analysis into incremental and radical product and process innovations. Endogeneity of representation institutions is taken into account by applying linear 2SLS and non-linear recursive multivariate probit models. Further robustness checks using matching algorithms are also applied. Our results show that voluntary employee representation significantly contributes to successfully conducted innovations. With respect to works councils, we find mixed evidence for the impact on product innovation. Additionally, our estimation framework allows us to implicitly test the relationship between voluntary institutions and works councils in which the results point to a substitutive relationship between both types of employee representation. Our results have important implications for the governance of firms.
Selected Work in Progress
- Introduction and dissolution of voluntary employee representation in times of crisis