Labour Market Institutions { Amplifiers or Attenuators? INAUGURALDISSERTATION zur Erlangung der Wurde¨ eines Doktors der Wirtschaftswissenschaft der Fakultat¨ fur¨ Wirtschaftswissenschaft der Ruhr-Universitat¨ Bochum Kumulative Dissertation, bestehend aus 5 Beitragen¨ vorgelegt von Rahel Felder, M.Sc. aus Huttwil, Kanton Bern, Schweiz 2019 Dekan: Prof. Dr. Michael Roos Referent Prof. Dr. Thomas K. Bauer Korreferent: Prof. Dr. Ronald Bachmann Tag der mundlichen¨ Prufung:¨ 22. Oktober 2019 Contents List of Tables iii List of Figures v 1 Introduction 1 2 Labour Market Transitions, Shocks and Institutions 9 2.1 Introduction..................................... 10 2.2 Unemployment and Labour Market Flows Over the Cycle .......... 13 2.3 Labour Market Institutions and their Interaction with Shocks......... 19 2.4 Methodology .................................... 24 2.5 Results........................................ 27 2.5.1 Main Analysis................................ 27 2.5.2 Robustness ................................. 35 2.6 Conclusion...................................... 37 2.A Figures and Tables ................................. 40 2.B Data Description and Imputation Methods ................... 51 3 Job Stability in Europe Over the Cycle 54 3.1 Introduction..................................... 55 3.2 The European Union Labour Force Survey (EU-LFS) Data........... 58 3.3 The Aggregate Evidence.............................. 59 3.4 Worker and Job Heterogeneities.......................... 65 3.4.1 Worker Characteristics: Age........................ 66 3.4.2 Job Characteristics: Contract Type.................... 73 3.5 Econometric Findings: Regression Analysis................... 80 3.6 Conclusion...................................... 87 3.A Supplementary Figures and Tables........................ 90 4 Potential Benefit Duration Effect on Reemployment Timing and Wages 93 4.1 Introduction..................................... 94 4.2 Empirical Strategy ................................. 97 4.2.1 Identifying Local Average Treatment Effects .............. 97 4.2.2 Wage Decomposition............................ 100 4.3 Heterogeneity and Its Consequences....................... 102 4.3.1 Dynamic Differences and Dynamic Treatment Effects . 103 4.3.2 Heterogeneity in Duration Effects Changes Dynamic Selection . 105 CONTENTS ii 4.3.3 Identifying Effects on Wages and Other Outcomes Affected by Dura- tion...................................... 107 4.4 Background, Data and Prior Results ....................... 109 4.4.1 Institutional Framework and Data.................... 109 4.4.2 RDD Validity and Prior Results...................... 111 4.4.3 The Reemployment Wage Path, Its Importance and Problems . 113 4.5 Dynamic Selection ................................. 117 4.5.1 Heterogeneous Duration Effects and Reemployment Probability and Timing.................................... 118 4.5.2 Dynamic Selection on Observable and Time-Invariant Characteristics 121 4.6 Isolating Wage Effects ............................... 126 4.6.1 Effects on Wage Components....................... 127 4.6.2 Dynamics of Wage Components ..................... 129 4.7 Conclusion...................................... 133 4.A Identification of UI Eligibility in the Data .................... 136 4.B Wage Decomposition................................ 137 4.C RDD Validity and Prior Results.......................... 140 4.D Additional Figures and Tables........................... 143 5 Labour Market Participation and Atypical Employment 145 5.1 Atypical Employment in Germany: Extent and Importance . 146 5.2 Data and Definition of Atypical Employment.................. 150 5.3 Life Cycle Employment Profiles by Birth Cohort and Gender . 152 5.4 Typical Employment Trajectories: Results of a Sequence Analysis . 162 5.4.1 Education and First Job Entry....................... 164 5.4.2 Early Main Employment Period ..................... 168 5.5 Summary and Conclusion............................. 172 5.A Figures........................................ 175 6 Worker Motives for Multiple Job Holding in Germany 179 6.1 Introduction..................................... 180 6.2 Data.......................................... 182 6.3 Aggregate Trends and Institutional Background . 184 6.4 Worker Motives................................... 188 6.4.1 Determinants................................ 189 6.4.2 Consequences................................ 192 6.5 Conclusion...................................... 195 6.A Tables......................................... 197 Bibliography 198 Acknowledgements 210 Curriculum Vitae 211 List of Tables 2.1 Unobserved shocks model ............................. 28 2.2 Observed shocks model............................... 29 2.A.1 Descriptive statistics of labour market institutions ............... 42 2.A.2 Pairwise correlations across labour market institutions, total variation . 42 2.A.3 Descriptive statistics of the regression sample.................. 42 2.A.4 Heterogeneity of main economic recessions ................... 42 2.A.5 Observed shocks model, annual data....................... 43 2.A.6 Observed shocks model, economic growth periods............... 44 2.A.7 Observed shocks model, economic recession periods.............. 45 2.A.8 Observed shocks model, lagged institutions................... 46 2.A.9 Observed shocks model, fixed institutions.................... 47 2.A.10 Observed shocks model, without Portugal.................... 48 2.A.11 Observed shocks model, without Germany.................... 49 2.A.12 Observed shocks model, with temporary employment............. 50 2.A.13 Observed shocks model, total E outflows..................... 51 3.1 Shift-share analysis of change in mean tenure, according to age . 71 3.2 Shift-share analysis of change in mean tenure, according to contract type . 79 3.3 Results of regression analysis of individual tenure before and during the crisis 81 3.A.1 Summary of sample before and during the crisis, percentage ......... 90 3.A.2 Results of regression analysis of individual tenure before and during the crisis 92 3.A.3 Importance of estimated components for the explanatory power of the model, percentage of the predicted variance ....................... 92 4.1 Effect of PBD on unemployment and nonemployment duration and reem- ployment wages................................... 113 4.2 Effect of PBD on reemployment wage components and pre minus post changes in wage components................................. 128 4.B.1 Wage decompostition................................ 137 6.1 Worker and job characteristics of multiple and single job holders by sex, 2003- 2014 .......................................... 190 6.2 Determinants of multiple job holding by sex, 2003-2014 . 191 6.3 Differences in labour market mobility between multiple and single job hold- ers by sex, 2003-2013................................. 193 6.A.1 Differences in labour market mobility between multiple and single job hold- ers by sex, 2003-2013, complete decomposition . 197 List of Figures 1.1 Unemployment rate, 2001-2013 .......................... 2 2.1 Relationship between annual GDP growth and labour market reactions at the beginning of the Great Recession, 2007 and 2008................. 15 2.2 Unemployment rate by country, 1999-2013.................... 17 2.3 Annual transition rates between employment and unemployment by coun- try, 1999-2013..................................... 18 2.4 Relationship between union density and labour market reactions, 1999 and 2013 .......................................... 33 2.A.1 Annual GDP growth by country, 1999-2013.................... 40 2.A.2 Employment protection legislation by country, 1999-2013 ........... 41 2.A.3 Union density rate by country, 1999-2013..................... 41 3.1 Mean tenure and unemployment rate in the EU, 2002-2012 .......... 60 3.2 Mean tenure and unemployment rate by EU Member State, 2002-2012 . 63 3.3 Mean tenure before and during the crisis by EU Member State . 64 3.4 Mean tenure by age group in the EU, 2002-2012................. 67 3.5 Mean tenure by age group for selected EU Member States, 2002-2012 . 68 3.6 Mean tenure by age group before and during the crisis by EU Member State 69 3.7 Mean tenure by contract type in the EU, 2002-2012............... 74 3.8 Mean tenure of temporary workers in selected EU Member States, 2002-2012 75 3.9 Mean tenure of temporary workers before and during the crisis by EU Mem- ber State........................................ 77 3.10 Relationship between mean tenure and the EPL index for EU Member States, 2007 .......................................... 85 3.11 Relationship between the change in mean tenure during the recession and the EPL index for EU Member States ....................... 86 4.1 Reemployment rate ................................. 113 4.2 Reemployment wages................................ 115 4.3 “Effect” of PBD on worker fixed effects...................... 116 4.4 “Effect” of PBD on worker fixed effect by transition paths . 117 4.5 Quantile treatment effect .............................. 119 4.6 Dynamic selection on worker fixed effects: Aggregated PBD groups . 122 4.7 Dynamic selection on time-invariant characteristics and time-varying observ- ables.......................................... 124 4.8 Reemployment paths: Wage components..................... 130 4.C.1 RDD validity around the age threshold...................... 140 LIST OF FIGURES v 4.C.2 Effect of PBD on unemployment and nonemployment duration and reem- ployment wages..................................