14 IZA COMPACT · December 2000

OPINION Labor Market Research and Economic Practice

the labor market, very few economists arts of mathematics and language as bril- have specialized in empirical labor mar- liantly as the likes of Paul Samuelson, ket issues. Even among those involved Gary Becker, and Paul Krugman. with the Bündnis für Arbeit (Alliance for Jobs), labor market experts are hard to What lies at the heart of Germany’s find. The highest entity of labor market malaise in the field of labor market policy advice to the German government research? It is not that we lack the well- is the Institut für Arbeitsmarkt- und Berufs- trained young labor economists to apply forschung (Institute for Labor Market and modern methods to the problems of our Occupational Research, IAB). As part of time. What we need is access to the the Federal Employment Service, it can opportunities of policy advice and hardly be seen as completely ”indepen- research. The IAB currently holds the dent”, nor is it dominated by labor econ- monopoly in both areas. First of all, the omists. Our strategic task here at IZA is general inaccessibility of data constitutes to alleviate this deficit in labor market a market entry barrier. Empirical labor research and policy advice of economists. market research is often impossible in Germany because the Federal Employ- In international perspective, it is certainly ment Service keeps existing data in an legitimate to say that labor economics ironclad lockbox. Something like a ”Free has long been the ”most empirical” sub- the Data” initiative could help to change discipline of the economic sciences. This this situation. The commission installed has been, to a large extent, the achieve- by the Federal Research Ministry to There is hardly any corner in today’s ment of the labor economists associated explore ways to make official data acces- information society that remains unex- with America’s leading institution in this sible to economists should place itself at plored. And in most cases, newly found field, the National Bureau of Economic the top of this initiative. An additional insights enjoy wide dissemination. Yet, it Research (NBER), who have shaped the problem lies in the fact the policymakers is often claimed that academic science debates in the most prominent interna- rely almost exclusively on paid expert and politics are drifting ever further apart tional journals. The same is true for the reports by the IAB. – particularly in the field of economics. Centre for Economic Policy Research As evidence in support of this claim, crit- (CEPR) in Europe. Nonetheless, this In this situation, the German research ics point out that governments are relin- year’s Nobel Prize in Economics, while it community hardly has a chance to intro- quishing their reliance on economists’ did go to a labor economist, was award- duce ”free” research findings into the advice. Economic science itself is accused ed to the ”mathematician of labor mar- decision-making process. Due to the lack of seeking refuge in the idealized world of ket policy”: IZA Fellow James Heckman, of data access, these efforts depend on mathematics, far away from the real economics professor at the University of such special initiatives as the Socio-Eco- world. These presumptions, however, are Chicago. Heckman received the award nomic Panel (SOEP) provided by the Ger- easily rebutted – especially the claim that for his methodological contributions to man Institute for Economic Research researchers are so out of touch with real- labor market econometrics, but most of (DIW Berlin). That the evaluation of ity that they have inadvertently maneu- all – and this is important to note – for planned experiments in the low-wage sec- vered themselves into an offside position his influence on the scientific evaluation tor was given exclusively to the IAB, while on the political playing field. It is certain- of labor market policies. independent researchers were once again ly not a mere coincidence that the Ger- left out in the cold, is a fact that requires man Wissenschaftsrat (Science Council) This may well be the best conceivable no comment. The best solution to the established a commission to analyze the rebuttal to the thesis that economists problem would be a combination of situation of empirical economic research lack contact with reality. Mathematics cooperation and competition. In this in Germany, including the status quo of has become an indispensable tool, not context, IZA also sees itself as a forum economic theory at universities. just for modern science but also for the and a mediator between policymakers, political practice. No doctor will discard IAB, and independent research. The relationship between labor econom- his medical kit when facing a severely ill ics and labor market policy in Germany, patient. But it is correct to demand that however, seems to support the thesis of economists must overcome their speech- the two ”separated worlds”. Despite the lessness when called to the sickbed. continuing employment crisis that has hit Unfortunately, not everyone masters the

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