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Journal for Labour Market Research

Table 6 Estimation of the basic model of dynamic labor demand with fix, convex and asymmetric adjustment costs allowing for different adjustment behavior in different business cyclesa (only private plants which adjust their level of employment; 1996–2010; two-step GMM-SYS estimator; dependent variable is log number of employees covered by social security)

From: Employment adjustment in German firmsBetriebliche Beschäftigungsanpassung in Deutschland

Explanatory variables

Western Germany

Eastern Germany

coeff.

std.error

coeff.

std.error

Lagged employment l t−1

0.7210***

0.0454

0.6831***

0.0585

l t−1 ×dummy(1=L increased between t−1 and t)

−0.0626***

0.0092

−0.0771***

0.0161

l t−1 ×dummy(1=obs. from 1996–2003)

0.0221***

0.0035

0.0424***

0.0090

Turnover (log)

0.0170

0.0190

0.0505

0.0402

Nom. wage bill per employee (log)

−0.0685***

0.0172

−0.1021***

0.0257

Share of female employees (in percent)

0.0003

0.0006

−0.0001

0.0011

Share of qualified employees (in percent)

−0.0014***

0.0003

−0.0013***

0.0005

Share of part-time employees (in percent)

0.0010**

0.0004

0.0015**

0.0006

Share of fixed-term employees (in percent)

0.0004

0.0008

0.0007

0.0008

Share of employees covered by social security (in percent)

0.0159***

0.0010

0.0182***

0.0021

Profit situation ‡(dummy: very good/good = 1)

0.0173***

0.0052

0.0380***

0.0095

Modern production technology (dummy: 1 or 2 on 5-point scale = 1)

0.0136**

0.0057

0.0201

0.0130

Works council ‡(dummy: yes = 1)

−0.0133

0.0172

−0.0242

0.0282

Covered by collective agreement ‡(dummy: yes = 1)

−0.0062

0.0113

−0.0005

0.0127

Firm expects turnover increase (dummy: yes = 1)

0.0050

0.0051

0.0200*

0.0106

Firm expects turnover reduction (dummy: yes = 1)

−0.0315***

0.0049

−0.0464***

0.0097

Constant

−0.0809

0.4241

−1.0865**

0.4894

Industry dummies

yes

 

yes

 

Year dummies

yes***

 

yes***

 

Selection term

yes***

 

yes**

 

Other interactions with dummy(1=L increased between t−1 and t)

yes***

 

yes***

 

Number of observations (plant-years)

28824

 

17577

 

Wald (74/71)

4568.55***

 

11215.95***

 

Hansen (103/100)

265.3168***

 

250.9633***

 

Arellano-Bond (m1 | m2)

−5.63***

0.43

−6.67***

1.22

  1. aThe table presents coefficients and standard errors that are calculated from a bootstrapping with 150 replications. Reference categories of the dummy variable groups: no turnover change expected, agriculture and forestry, 1996 and 1997 (Eastern Germany: additional 1998 and 1999). Significance levels: ∗ p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01. In order to avoid a correlation with the error term, I use l t−2 instead of l t−1 for the interaction. The model for Eastern Germany is estimated with two lags to get an Arellano-Bond-Test which does not indicate second-order serial correlation in the first-differenced residuals. Arellano-Bond (m1 | m2) are tests for first- and second-order serial correlation in the first differenced residuals. ‡Indicates that the information refers to the previous year
  2. Source: IAB Establishment Panel, waves 1996–2010
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