Labor Demand During the Crisis: What Happened in Germany?

35 Pages Posted: 13 Nov 2011

See all articles by Olga Bohachova

Olga Bohachova

affiliation not provided to SSRN

Bernhard Boockmann

ZEW – Leibniz Centre for European Economic Research; Institute for Applied Economic Research (IAW); IZA Institute of Labor Economics

Claudia M. Buch

Deutsche Bundesbank

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Abstract

In Germany, the employment response to the post-2007 crisis has been muted compared to other industrialized countries. Despite a large drop in output, employment has hardly changed. In this paper, we analyze the determinants of German firms' labor demand during the crisis using a firm-level panel dataset. Our analysis proceeds in two steps. First, we estimate a dynamic labor demand function for the years 2000-2009 accounting for the degree of working time flexibility and the presence of works councils. Second, on the basis of these estimates, we use the difference between predicted and actual employment as a measure of labor hoarding as the dependent variable in a cross-sectional regression for 2009. Apart from total labor hoarding, we also look at the determinants of subsidized labor hoarding through short-time work. The structural characteristics of firms using these channels of adjustment differ. Product market competition has a negative impact on total labor hoarding but a positive effect on the use of short-time work. Firm covered by collective agreements hoard less labor overall; firms without financial frictions use short-time work less intensively.

Keywords: labor demand, economic crisis, short-time work, financial frictions, labor market institutions, employment adjustment

JEL Classification: J23, J68, G32

Suggested Citation

Bohachova, Olga and Boockmann, Bernhard and Buch, Claudia M., Labor Demand During the Crisis: What Happened in Germany?. IZA Discussion Paper No. 6074, Available at SSRN: https://ssrn.com/abstract=1958729 or http://dx.doi.org/10.2139/ssrn.1958729

Olga Bohachova (Contact Author)

affiliation not provided to SSRN ( email )

Bernhard Boockmann

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany
+621 1235 156 (Phone)
+621 1235 225 (Fax)

Institute for Applied Economic Research (IAW) ( email )

Ob dem Himmelreich 1
Tubingen, 72074
Germany

HOME PAGE: http://www.iaw.edu

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Claudia M. Buch

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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