[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp7656.html
   My bibliography  Save this paper

The Structure of Hiring Costs in Germany: Evidence from Firm-Level Data

Author

Listed:
  • Mühlemann, Samuel

    (University of Munich)

  • Pfeifer, Harald

    (BIBB)

Abstract
This paper analyzes the structure of hiring costs of skilled workers in Germany. Using detailed and representative firm-level data on recruitment and adaptation costs of new hires, we find that average hiring costs amount to more than 8 weeks of wage payments (4,700 Euros). The structure of hiring costs is convex, as an increase in the number of hires by 1% increases hiring costs by 1.3%. We find moderate effects of labor market institutions on the magnitude but none on the structure of hiring costs. Furthermore, we provide evidence in favor of monopsony power in the German labor market.

Suggested Citation

  • Mühlemann, Samuel & Pfeifer, Harald, 2013. "The Structure of Hiring Costs in Germany: Evidence from Firm-Level Data," IZA Discussion Papers 7656, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7656
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp7656.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. John T. Addison & Claus Schnabel & Joachim Wagner, 2004. "The Course of Research into the Economic Consequences of German Works Councils," British Journal of Industrial Relations, London School of Economics, vol. 42(2), pages 255-281, June.
    2. Tito Boeri & Herbert Bruecker, 2011. "Short-time work benefits revisited: some lessons from the Great Recession [‘Reversed roles? Wage and employment effects of the current crisis’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 26(68), pages 697-765.
    3. Richard B. Freeman & Edward P. Lazear, 1995. "An Economic Analysis of Works Councils," NBER Chapters, in: Works Councils: Consultation, Representation, and Cooperation in Industrial Relations, pages 27-52, National Bureau of Economic Research, Inc.
    4. Karl BRENKE & Ulf RINNE & Klaus F. ZIMMERMANN, 2013. "Short-time work: The German answer to the Great Recession," International Labour Review, International Labour Organization, vol. 152(2), pages 287-305, June.
    5. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September.
    6. Russell Cooper & Jonathan Willis, 2009. "The Cost of Labor Adjustment: Inferences from the Gap," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(4), pages 632-647, October.
    7. Manning, Alan, 2011. "Imperfect Competition in the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 11, pages 973-1041, Elsevier.
    8. Eran Yashiv, 2000. "Hiring as Investment Behavior," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 486-522, July.
    9. Blatter, Marc & Muehlemann, Samuel & Schenker, Samuel, 2012. "The costs of hiring skilled workers," European Economic Review, Elsevier, vol. 56(1), pages 20-35.
    10. Michael R Ransom & David P. Sims, 2010. "Estimating the Firm's Labor Supply Curve in a "New Monopsony" Framework: Schoolteachers in Missouri," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 331-355, April.
    11. Hyslop, Dean R & Imbens, Guido W, 2001. "Bias from Classical and Other Forms of Measurement Error," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 475-481, October.
    12. Boris Hirsch & Thorsten Schank & Claus Schnabel, 2009. "Works Councils and Separations: Voice, Monopoly, and Insurance Effects," Working Papers 075, Bavarian Graduate Program in Economics (BGPE).
    13. Webber, Douglas A., 2015. "Firm market power and the earnings distribution," Labour Economics, Elsevier, vol. 35(C), pages 123-134.
    14. Ricardo J. Caballero & Eduardo M.R.A. Engel, 2004. "A Comment on the Economics of Labor Adjustment: Mind the Gap: Reply," American Economic Review, American Economic Association, vol. 94(4), pages 1238-1244, September.
    15. Christopher A. Pissarides, 2009. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," Econometrica, Econometric Society, vol. 77(5), pages 1339-1369, September.
    16. John T. Addison & Paulino Teixeira & Thomas Zwick, 2010. "German Works Councils and the Anatomy of Wages," ILR Review, Cornell University, ILR School, vol. 63(2), pages 247-270, January.
    17. Ulf Rinne & Klaus Zimmermann, 2012. "Another economic miracle? The German labor market and the Great Recession," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-21, December.
    18. Arindrajit Dube & T. William Lester & Michael Reich, 2016. "Minimum Wage Shocks, Employment Flows, and Labor Market Frictions," Journal of Labor Economics, University of Chicago Press, vol. 34(3), pages 663-704.
    19. Knut Gerlach & Gesine Stephan, 2008. "A Note on Job Tenure and Collective Contracts," LABOUR, CEIS, vol. 22(1), pages 167-183, March.
    20. Steven J. Davis & R. Jason Faberman & John Haltiwanger, 2006. "The Flow Approach to Labor Markets: New Data Sources and Micro-Macro Links," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 3-26, Summer.
    21. Abowd, John M. & Kramarz, Francis, 2003. "The costs of hiring and separations," Labour Economics, Elsevier, vol. 10(5), pages 499-530, October.
    22. Caballero, Ricardo J & Engel, Eduardo M R A & Haltiwanger, John, 1997. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," American Economic Review, American Economic Association, vol. 87(1), pages 115-137, March.
    23. Dube, Arindrajit & Freeman, Eric & Reich, Michael, 2010. "Employee Replacement Costs," Institute for Research on Labor and Employment, Working Paper Series qt7kc29981, Institute of Industrial Relations, UC Berkeley.
    24. Alan Manning, 2006. "A Generalised Model of Monopsony," Economic Journal, Royal Economic Society, vol. 116(508), pages 84-100, January.
    25. Joel Rogers & Wolfgang Streeck, 1995. "Works Councils: Consultation, Representation, and Cooperation in Industrial Relations," NBER Books, National Bureau of Economic Research, Inc, number roge95-1.
    26. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    27. Uwe Jirjahn, 2010. "Works councils and employment growth in German establishments," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 34(3), pages 475-500.
    28. Uwe Jirjahn, 2009. "The Introduction of Works Councils in German Establishments — Rent Seeking or Rent Protection?," British Journal of Industrial Relations, London School of Economics, vol. 47(3), pages 521-545, September.
    29. Russell Cooper & Jonathan L. Willis, 2004. "A Comment on the Economics of Labor Adjustment: Mind the Gap: Rejoinder," American Economic Review, American Economic Association, vol. 94(4), pages 1245-1247, September.
    30. Francis Kramarz & Marie-Laure Michaud, 2002. "The Shape of Hiring and Separation Costs," Working Papers 2002-38, Center for Research in Economics and Statistics.
    31. John T. Addison & Paulino Teixeira, 2005. "The Effect of Works Councils on Employment Change," GEMF Working Papers 2005-06, GEMF, Faculty of Economics, University of Coimbra.
    32. Carola M. Frege, 2002. "A Critical Assessment of the Theoretical and Empirical Research on German Works Councils," British Journal of Industrial Relations, London School of Economics, vol. 40(2), pages 221-248, June.
    33. Kramarz, Francis & Michaud, Marie-Laure, 2010. "The shape of hiring and separation costs in France," Labour Economics, Elsevier, vol. 17(1), pages 27-37, January.
    34. Dale T. Mortensen, 2005. "Wage Dispersion: Why Are Similar Workers Paid Differently?," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633191, April.
    35. Orley C. Ashenfelter & Henry Farber & Michael R Ransom, 2010. "Labor Market Monopsony," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 203-210, April.
    36. Russell Cooper & Jonathan L. Willis, 2004. "A Comment on the Economics of Labor Adjustment: Mind the Gap," American Economic Review, American Economic Association, vol. 94(4), pages 1223-1237, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Blatter, Marc & Muehlemann, Samuel & Schenker, Samuel, 2012. "The costs of hiring skilled workers," European Economic Review, Elsevier, vol. 56(1), pages 20-35.
    2. Marc Blatter & Samuel Muehlemann & Samuel Schenker & Stefan C. Wolter, 2016. "Hiring costs for skilled workers and the supply of firm-provided training," Oxford Economic Papers, Oxford University Press, vol. 68(1), pages 238-257.
    3. Manning, Alan, 2011. "Imperfect Competition in the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 11, pages 973-1041, Elsevier.
    4. Samuel Muehlemann & Mirjam Strupler Leiser, 2015. "Ten Facts You Need To Know About Hiring," Economics of Education Working Paper Series 0111, University of Zurich, Department of Business Administration (IBW), revised Sep 2015.
    5. Ben Kriechel & Samuel Muehlemann & Harald Pfeifer & Miriam Schuette, 2011. "Works councils, collective bargaining and apprenticeship training," Economics of Education Working Paper Series 0057, University of Zurich, Department of Business Administration (IBW).
    6. Ija Trapeznikova, 2017. "Employment Adjustment And Labor Utilization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58, pages 889-922, August.
    7. Jordi Galí & Thijs van Rens, 2021. "The Vanishing Procyclicality of Labour Productivity [Why have business cycle fluctuations become less volatile?]," The Economic Journal, Royal Economic Society, vol. 131(633), pages 302-326.
    8. Steffen Müller & Jens Stegmaier, 2020. "Why is there resistance to works councils in Germany? An economic perspective," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 41(3), pages 540-561, August.
    9. Christian Grund & Andreas Schmitt, 2013. "Works councils, wages and job satisfaction," Applied Economics, Taylor & Francis Journals, vol. 45(3), pages 299-310, January.
    10. Uwe Jirjahn & Jens Mohrenweiser & Uschi Backes‐Gellner, 2011. "Works Councils and Learning: On the Dynamic Dimension of Codetermination," Kyklos, Wiley Blackwell, vol. 64(3), pages 427-447, August.
    11. Jung, Sven, 2013. "Employment Adjustment in German Firms," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79696, Verein für Socialpolitik / German Economic Association.
    12. Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    13. Ija Trapeznikova, 2017. "Employment Adjustment And Labor Utilization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(3), pages 889-922, August.
    14. Alexander Lammers & Felix Lukowski & Kathrin Weis, 2023. "The relationship between works councils and firms’ further training provision in times of technological change," British Journal of Industrial Relations, London School of Economics, vol. 61(2), pages 392-424, June.
    15. Samuel Muehlemann & Harald Pfeifer & Felix Wenzelmann, 2013. "The Costs of Recruiting Apprentices: Evidence from German Firm-Level Data," Economics of Education Working Paper Series 0095, University of Zurich, Department of Business Administration (IBW), revised Nov 2015.
    16. Uwe JIRJAHN & Stephen C. SMITH, 2018. "Nonunion Employee Representation: Theory And The German Experience With Mandated Works Councils," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(1), pages 201-233, March.
    17. Steffen Mueller & Jens Stegmaier, 2017. "The Dynamic Effects of Works Councils on Labour Productivity: First Evidence from Panel Data," British Journal of Industrial Relations, London School of Economics, vol. 55(2), pages 372-395, June.
    18. Rafael Gralla & Kornelius Kraft, 2018. "Separating Introduction Effects from Selectivity Effects:Â The Differences in Employment Patterns of Codetermined Firms," LABOUR, CEIS, vol. 32(1), pages 93-111, March.
    19. Giacinta Cestone & Chiara Fumagalli & Francis Kramarz & Giovanni Pica, 2023. "Exploiting Growth Opportunities: The Role of Internal Labor Markets," CSEF Working Papers 663, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    20. Lapatinas, Athanasios, 2009. "Labour adjustment costs: Estimation of a dynamic discrete choice model using panel data for Greek manufacturing firms," Labour Economics, Elsevier, vol. 16(5), pages 521-533, October.

    More about this item

    Keywords

    labor adjustment costs; hiring costs; search costs; adaptation costs;
    All these keywords.

    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp7656. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.