Projects

Halle is member of the Reseacrch Institute Social Cohesion (RISC). The RISC analyzes soicial challenges such as the regional diversity of social cohesion. More than 16 researchers in Halle from a variety of disciplines use on the one hand empirical studies to understand different regional living and working environments. On the other hand, in transfer studies they develop methods to promote positive forms of social cohesion.
[https://soziologie.uni-halle.de/fgz/?lang=en]

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Globalisation and technological change are usually considered welfare-enhancing developments by economists. This proposal sheds light on potentially very important political, social and economic costs that have, until very recently, been neglected: the recent rise of populist and nationalist movements, possibly leading to political disintegration of the European Project.
We start from the observation that trade integration and technological change can lead to growing regional disparities in labour market outcomes if import-competing regions lose jobs on a large scale (Autor et al. 2013; Dauth et al. 2014), or if regions are specialised in jobs which can be replaced by new technologies such as industrial robots (Acemoglu and Restrepo 2017). Some early economic studies point towards a direct link between import competition at the regional level and extreme political views (Autor et al. 2016; Dippel et al. 2015). We aim to develop this emerging literature by highlighting whether globalisation and technological/structural changes increase vote shares of populist and nationalist parties because of the economic hardships caused by these phenomena. We provide up to date and comparable evidence for European regions and also explore whether transfer payments via European Union (EU) structural funds mitigate these effects. We extend this basic analysis by focussing on the three specific cases of the Czech Republic, Germany, and the United Kingdom to provide a clear understanding of (i) which type of hardships matter, (ii) which subgroups are affected, (iii) whether individual-level or regional-level hardships matter and (iv) the individual-level economic mechanisms behind the rise of populism.
Methodologically, we will deploy both microeconometric and experimental tools to identify causal relationships between exogenous trigger events (e.g. import shocks, robot use, refugee inflow) and outcome variables (labour market, election outcomes and populist sentiments. We will make use of survey, experimental and administrative data at both aggregate (regional) and individual levels.
The ultimate goal of the project is to assess whether economic hardship, caused by forces hitting open economies - typically viewed as being beyond the control of individual voters and national authorities - can explain the recent success of populist and nationalist movements in the EU. In establishing whether economics matters, and for whom, which type of hardships matter, and whether EU structural funds are a means to mitigate the rise of anti-EU tendencies we provide guidance to European and national policy makers concerned with the future of the EU and open democratic societies.

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Labour productivity has slowed down atypically over the last decade or so in the developed world. That means that workers on average are not becoming more productive at quite the same speed as they used to.
A similar picture in terms of how labour productivity has slowed down is seen for total factor productivity, i.e. when considering all factors of production, including capital. This is despite technological advancements continuing, and thus offering opportunities for innovation, as well as firms progressively integrating in global value chains, and therefore encouraging competition and gains in efficiency. All of these would suggest improvements in productivity vs. the observed slow down, a paradoxical situation that indicates how poor and incomplete our understanding of the underlying mechanisms at work is.

The consequences of this slow down are not innocuous. Contrary to a long-term trend, the current generation expects that future generations may earn less than they do, raising issues about intergenerational transfers and sustainability of welfare systems across generations. At the same time, the benefits of the small productivity improvements are accruing disproportionately to capital over labour. The distribution of wealth is therefore becoming increasingly and very visibly unequal, a fact that causes societal anxiety and unrest. Understanding why this occurs is crucial as we prepare for the post financial crisis era.

But what is the root cause of this productivity slow down? Some have argued that part of the answer lies in the way we measure productivity. Outdated methodologies are not in the position to capture how value is created given current technology and therefore vastly underestimates the advancements in productivity. Others are increasingly paying attention to the role of intangible investments, in particular as digital business models are becoming increasingly successful. The argument here is that digital firms have the ability to scale up and produce more without proportional increases in capital. If you are Facebook, you can increase the number of people you reach (and therefore the potential for income) without much additional investment. By contrast, a department store would need to invest in property and people if it wanted to expand its operations. Measured aggregate productivity trends may underestimate future productivity growth when increases in aggregate expenditures disproportionately go to intangible intensive firms. Similarly, tracking productivity changes in real time is made difficult because the returns to intangible investment may be very delayed.

Furthermore, there are additional implications of intangible investments that are not fully understood. For example, the difficulty in funding intangible investment through traditional financial channels will have a large impact on firms that rely on tangibles. Even before that, as firms grow with little investments they also have fewer assets that can be used for accessing credit, a fact that may distort lending at an aggregate level. Moreover, the implications of an increased role of intangibles for the organisation of firms into global value chains are also unclear.

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Numerous studies document that employees with the same productive characteristics receive different wages from different employers. Such persistent firm wage differentials are inconsistent with a competitive labor market in which employers take the market wage as given and act as wage takers, and suggest that employers and employees receive substantial employment rents and have market power in wage determination. The aim of this project is to investigate the distribution of employment rents in imperfect labor markets and the influence of labor market institutions such as collective bargaining and co-determination on firm wage differentials. Beyond basic research, the project thus has the potential to inform important economic policy debates on the institutional design of the wage-setting process.
The project contributes to the existing literature as follows: (1) To date, there are only a few studies on rent-sharing, i.e. the influence of firm performance on wages, that identify a causal rent-sharing effect by means of credibly exogenous variation in firm performance. The use of the official firm-level data for Germany (AFiD) allows us to estimate such an effect based on time variation in firm energy costs. (2) One shortcoming of the literature is that the number of hours worked is generally unknown. However, rent-sharing can also take place via working hours instead of daily or monthly wages. By combining AFiD data and the Structure of Earnings Survey, we can use wages and firm performance per hour worked to estimate the bias in previous studies and examine differences in rent-sharing between establishments bound by collective agreements and those without. (3) A major problem in the literature is the use of theoretically unfounded measures of firm performance and firm wage premiums. By using the linked employer-employee dataset of the Institute for Employment Research (LIAB), we can calculate such adequate measures. In particular, we are able to adequately measure firm wage premiums based on an approach that decomposes wages into employee-specific and employer-specific components (Abowd, Kramarz, Margolis 1999). This allows us to examine the extent of rent-sharing and its variation as a function of collective bargaining coverage and co-determination and to test possible explanations for the increasing dispersion of company wage premiums since the 1990s. (4) With the LIAB data, we can also be the first to investigate the influencing variables on which the monopsony power of employers depends. In particular, we can examine whether collective bargaining agreements or co-determination have a moderating influence on their market power and to what extent the firm wage premiums vary with their wage-setting power.
This text was translated with DeepL on 26/02/2026

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Although the market exit of companies can be seen as an important and necessary determinant of structural change, the insolvency proceedings of traditional German companies (Schlecker, Weltbild, Zamek) have led to increased attention from political decision-makers and public perception in recent years. The focus of the negative effects and consequences of involuntary company closures is primarily on the dismissed employees, whose job loss may initially lead to unemployment and then to lasting damage to their employment biography.
While the empirical evidence of labor market economics has so far only dealt with the consequences for affected employees after plant closures or mass layoffs, the primary goal of this project is to gain new insights into the consequences of involuntary job changes due to employer insolvency. Research question (1) first examines the individual income development of affected employees, in which the insolvency of small companies can also be reliably taken into account for the first time. In order to gain precise knowledge about the causes of these possible income losses, the subsequent research question (2) sheds light on the consequences of involuntary job loss for the employment biography of affected individuals and should enable important conclusions to be drawn about the determinants of employment stability and the probability of switching to atypical employment relationships. In order to be able to draw conclusions about the exogeneity of job loss and about people who leave companies due to the threat of insolvency, research question (3) is intended to examine company developments prior to insolvencies on the basis of the fluctuation behavior of employee structure and productivity and to show how far back the "shadow of death" extends. The methodological analysis instruments of the individual research questions are chosen in such a way that, taking into account research question (4), a consistent comparability of the results with previous results of company closures and mass redundancies can be guaranteed.
In order to be able to comprehensively depict the consequences of insolvencies for affected employees over as long a period as possible, a completely new and unique data basis is being sought which, on the basis of the Integrated Employment Biography (IEB), links day-by-day information on individual employment and income development with information on the corresponding establishment level. The establishment data is collected on the one hand via the Establishment History Panel (BHP), which contains information on establishment and employment-related characteristics for all West German establishments with at least one valuable employee subject to social security contributions from 1975 onwards (from 1991 for East Germany), and on the other hand via the IAB Establishment Panel, whose representative employer survey of around 16,000 participants implements additional information on the operational determinants (earnings situation, productivity) of employment. The adequate identification of insolvent companies from the IAB company data is achieved by linking three other data sources (insolvency money, social security notifications and insolvency announcements) and follows the preliminary work and methodological approach of Müller and Stegmaier (2015).
This text was translated with DeepL on 26/02/2026

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Many observers claim that the lack of firm dynamics and structural change is the reason for the increasing productivity gap between the US and EU countries and advocate accelerated firm turnover and a start-up culture. It is clear that firm closure or rapid downsizing can generate adjustment costs at the worker side. In particular, the literature shows that workers displaced from stable jobs in large mature plants due to mass layoff or plant closure suffer severe long-run earnings losses (Jacobsen et al. 1993, Schmieder et al. 2009) and that young and small plants have a disproportionately high failure risk (Fackler et al. 2013; Mueller/Stegmaier 2015). It is widely assumed that displacement from young and small plants generates no or small adjustment costs for workers but, in fact, we know little about it.

We use novel administrative data on bankruptcies for Germany combined with administrative linked employer-employee data to estimate short- and long-run losses of workers displaced from young and small plants. We compare this with losses after being displaced from incumbent and large plants to relate the costs of structural change and trial and error. We discuss whether such adjustment costs are pure private costs (e.g. lost firm rents) or whether there are also social costs (productivity depreciations).
We find that structural change, i.e. the failure of mature plants, yields high earnings and that trial and error, i.e. the failure of young plants, yields earnings losses just slightly below that of structural change. Differences in the earnings losses caused by structural change and trial and error are mainly driven by wage losses of older workers in mature plants. Hence, the focus of the literature on high-tenured workers displaced from larger plant targets those suffering most. Job displacements have social costs and they are more associated with structural change. Whether trial and error costs are mainly private costs will be explored in the (near) future.

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Workers may experience reduced wages after job displacement because of productivity losses or lost firm rents. We disentangle both channels by running worker fixed-effects regressions of wages and firm wage premia, respectively, for workers displaced due to employer bankruptcy compared to a control group of non-displaced workers. Premia are measured as firm effects from a two-way fixed-effects approach as described in Abowd, Kramarz, and Margolis (1999). Using German administrative data we find that wage losses are moderate and do slightly increase with pre-displacement tenure. The average worker loses a small part of her firm premia and, importantly, premia losses also increase with pre-displacement tenure. High-tenure workers have initially been employed at higher paying firms and job displacement makes them partially lose this advantage. As we find that pre-displacement tenure affects losses in wages and wage premia to the same extent, wage losses seem not be driven by productivity depreciations.

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