Employment adjustment in German firms

Journal for Labour Market Research

Table 2 Estimation of the basic model of dynamic labor demand with convex adjustment costs^a (only private sector; 1996–2010; two-step GMM-SYS estimator; dependent variable is log number of employees covered by social security)

Explanatory variables	Western Germany		Eastern Germany
Explanatory variables	coeff.	std.error	coeff.	std.error
Lagged employment l _t−1	0.6746^***	0.0252	0.6600^***	0.0232
Turnover (log)	0.0310^***	0.0099	0.0238^**	0.0110
Nom. wage bill per employee (log)	−0.0867^***	0.0082	−0.0783^***	0.0101
Share of female employees (in percent)	0.0002	0.0003	−0.0003	0.0003
Share of qualified employees (in percent)	−0.0013^***	0.0001	−0.0014^***	0.0002
Share of part-time employees (in percent)	0.0006^***	0.0002	0.0011^***	0.0002
Share of fixed-term employees (in percent)	0.0020^***	0.0004	0.0024^***	0.0004
Share of employees covered by social security (in percent)	0.0164^***	0.0005	0.0202^***	0.0006
Profit situation ‡(dummy: very good/good = 1)	0.0258^***	0.0031	0.0259^***	0.0038
Modern production technology (dummy: 1 or 2 on 5-point scale = 1)	0.0055	0.0038	0.0122^**	0.0048
Works council ‡(dummy: yes = 1)	−0.0299^***	0.0100	−0.0105	0.0124
Covered by collective agreement ‡(dummy: yes = 1)	0.0035	0.0054	0.0021	0.0053
Firm expects turnover increase (dummy: yes = 1)	0.0233^***	0.0029	0.0399^***	0.0041
Firm expects turnover reduction (dummy: yes = 1)	−0.0366^***	0.0033	−0.0586^***	0.0040
Constant	−0.0838	0.1505	−0.5030^***	0.1590
Industry dummies	yes		yes
Year dummies	yes^***		yes^***
Number of observations (plant-years)	49577		38141
Wald (37)	4248.20^***		5602.03^***
Hansen (103)	122.5397^*		184.8406^***
Arellano-Bond (m1 \| m2)	−12.52^***	−1.47	−14,66^***	1.57
Theil U	0.1180		0.1367

^aThe table presents coefficients and Windmeijer-corrected standard errors. Reference categories of the dummy variable groups: no turnover change expected, agriculture and forestry, 1996 and 1997. Significance levels: ^∗ p<0.1; ^∗∗ p<0.05; ^∗∗∗ p<0.01. Arellano-Bond (m1 | m2) are tests for first- and second-order serial correlation in the first differenced residuals. For the Theil U statistics the years 2008 to 2010 are predicted based on an estimation of the years 1996 to 2007. ‡Indicates that the information refers to the previous year
Source: IAB Establishment Panel, waves 1996–2010