Discussion Papers

Discussion Paper No. 127
November 21, 2018

A Proposed Data Set for Analyzing the Labor Market Trajectories of East Germans Around Reunification

Authors:

Liepmann, Hannah (HU Berlin)
Müller, Dana (Research Data Centre (FDZ) of the Federal Employment Agency (BA) at the Institute for Employment Research (IAB))

Abstract:

Data from German social security notifications and internal procedures of the Federal Employment Agency are an important source for analyzing labor market trajectories. However, for East Germans these data are only fully available from 1992 onwards. As a consequence of German reunification, by 1992 significant fractions of East Germans had already lost their jobs, had changed their occupations and industries, and had moved to West Germany. We partially close the gap in the data by linking the "Integrated Employment Biographies" - that start in 1992 for East Germany - with the GDR's "Data Fund of Societal Work Power" from 1989. The new data set permits the analysis of phenomena such as unemployment, job mobility, and regional mobility. It can also be used to refine the existing knowledge of the individual-level labor market consequences of German reunification. Our long-term goal is to make the new data set available to the research community via the Research Data Center of the Federal Employment Agency.

Keywords:

east germany; german reunification; labor market trajectories; administrative data; record linkage

JEL-Classification:

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Discussion Paper No. 125
November 8, 2018

Dissecting Between-Plant and Within-Plant Wage Dispersion – Evidence From Germany

Authors:

Baumgarten, Daniel (LMU Munich)
Felbermayr, Gabriel (ifo Institute)
Lehwald, Sybille (Federal Ministry for Economic Affairs and Energy)

Abstract:

Using rich linked employer-employee data for (West) Germany between 1996 and 2014, we analyze the most important drivers of the recent rise in German wage dispersion and pin down the relative contribution of plant and worker characteristics. Moreover, we separately investigate the drivers of between-plant and within-plant wage dispersion. We also analyze the sources of the recent slowdown in German wage inequality and compare the results for West Germany to the ones for East Germany. We disentangle the relative contribution of each single variable to the rise in wage dispersion using recentered influence function (RIF) regressions. The most important drivers of wage dispersion are industry effects and the bargaining regime. The former predominantly works through the wage structure effect while, in the latter case, both the decline in collective bargaining coverage and the strong increase in wage dispersion within the group of covered plants have played a substantial role. While education has been another factor contributing to both between-plant and within-plant wage inequality, other candidate factors such as plant size, the exporting status, plant technology, and investment intensity are all of little if any direct quantitative importance for the increase in wage dispersion.

Keywords:

wage inequality; decomposition; rif-regression; linked employer-employee data

JEL-Classification:

J31; J51; C21; F16

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Discussion Paper No. 124
November 2, 2018

It’s not my Fault! Self-Confidence and Experimentation

Authors:

Hestermann, Nina (Toulouse School of Economics)
Le Yaouanq, Yves (LMU Munich)

Abstract:

We study the inference and experimentation problem of an agent in a situation where the outcomes depend on the individual's intrinsic ability and on an external variable. We analyze the mistakes made by decision-makers who hold inaccurate prior beliefs about their ability. Overconfident individuals take too much credit for their successes and excessively blame external factors if they fail. They are too easily dissatisfied with their environment, which leads them to experiment in variable environments and revise their self-confidence over time. In contrast, underconfident decision-makers might be trapped in low-quality environments and incur perpetual utility losses.

Keywords:

overconfidence; attribution bias; experimentation; learning.

JEL-Classification:

D83

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Discussion Paper No. 123
October 25, 2018

Beliefs as a Means of Self-Control? Evidence from a Dynamic Student Survey

Authors:
König, Tobias (HU Berlin)
Schweighofer-Kodritsch, Sebastian (HU Berlin and WZB Berlin)
Weizsäcker, Georg (HU Berlin)
Abstract:

We repeatedly elicit beliefs about the returns to study effort in a panel survey of students of a large university course. A behavioral model of quasi-hyperbolic discounting and malleable beliefs yields the prediction that the dynamics of return beliefs mirrors the importance of exerting self-control, such that return expectations first increase as the exam approaches, and then sharply drop post-exam. Exploiting variation in exam timing to control for common information shocks, we find this prediction confirmed: average subjective expectations of returns increase by about 20% over the period before the exam, and drop by about the same amount afterwards.

Keywords:
belief elicitation; return to study effort; dynamic belief patterns
JEL-Classification:
D90; I26
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Discussion Paper No. 122
October 22, 2018

Testing

Authors:

Bergbauer, Annika B. (ifo Institute)
Hanushek, Eric A. (Stanford University)
Woessmann, Ludger (ifo Institute and LMU Munich)

Abstract:

We investigate the achievement impact of alternative uses of student assessments. Our dataset covers over 2 million students in 59 countries observed over 6 waves in the international PISA test 2000-2015. Our empirical model exploits the country panel dimension to investigate assessment reforms over time, taking out country and year fixed effects. The expansion of standardized external comparisons, both school-based and student-based, is associated with improvements in student achievement. The effect of school-based comparison is stronger in low-performing countries. By contrast, solely internal testing without external comparison and internal teacher monitoring including inspectorates do not affect student achievement.

Keywords:

student assessment; testing; accountability; student achievement; international; pisa

JEL-Classification:

I28; H52; L15; D82; P51

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Discussion Paper No. 121
October 17, 2018

Can Education Compensate the Effect of Population Aging On Macroeconomic Performance?
Evidence From Panel Data

Authors:

Kotschy, Rainer (LMU Munich)
Sunde, Uwe (LMU Munich)

Abstract:

This paper investigates the consequences of population aging and of changes in the education composition of the population for macroeconomic performance. Estimation results from a theoretically founded empirical framework show that aging as well as the education composition of the population influence economic performance. The estimates and simulations based on population projections and different counterfactual scenarios show that population aging will have a substantial negative consequence for macroeconomic performance in many countries in the years to come. The results also suggest that education expansions tend to offset the negative effects, but that the extent to which they compensate the aging effects differs vastly across countries. The simulations illustrate the heterogeneity in the effects of population aging on economic performance across countries, depending on their current age and education composition. The estimates provide a method to quantify the increase in education that is required to offset the negative consequences of population aging. Counterfactual changes in labor force participation and productivity required to neutralize aging are found to be substantial.

Keywords:

demographic change; demographic structure; distribution of skills; projections; education-aging-elasticity

JEL-Classification:

J11; O47

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Discussion Paper No. 120
October 11, 2018

Communicating Subjective Evaluations

Author:

Lang, Matthias (LMU Munich)

Abstract:

Consider managers evaluating their employees' performances. Should managers justify their subjective evaluations? Suppose a manager's evaluation is private information. Justifying her evaluation is costly but limits the principal's scope for distorting her evaluation of the employee. I show that the manager justifies her evaluation if and only if the employee's performance was poor. The justification assures the employee that the manager has not distorted the evaluation downwards. For good performance, however, the manager pays a constant high wage without justification. The empirical literature demonstrates that subjective evaluations are lenient and discriminate poorly between good performance levels. This pattern was attributed to biased managers. I show that these effects occur in optimal contracts without any biased behavior.

Keywords:

communication; justification; subjective evaluation; centrality; leniency; disclosure

JEL-Classification:

D82; D86; J41; M52

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Discussion Paper No. 119
October 11, 2018

Show What You Risk – Norms for Risk Taking

Author:

Grimm, Stefan (LMU Munich)

Abstract:

Most economic decisions are embedded in a specific social context. In many such contexts, individual choices are influenced by their observability due to underlying social norms and social image concerns. This study investigates the impact of choices being observed, compared to anonymity of choices, on risk taking in a laboratory experiment. I relate participants' investments in a risky asset directly to social norms for risk taking that are elicited in an incentivized procedure. I find that risk taking is not affected by the choice being observed by a matched participant. Nor do investments follow elicited norms for risk taking more closely when observed. This holds when considering males and females separately. However, I provide strong evidence for gender-specific norms in risk taking. While these explain part of the existing gender gap in risk taking, males still "overshoot" by investing more than the norm dictates. This is particularly true for males being matched with a female participant.

Keywords:

risk taking; observability; social image; norms; gender

JEL-Classification:

C91; D01; D81; D91; G11

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Discussion Paper No. 118
September 20, 2018

Class Rank and Long-Run Outcomes

Authors:

Denning, Jeffrey T. (Brigham Young University)
Murphy, Richard (University of Texas at Austin)
Weinhardt, Felix (DIW Berlin)

Abstract:

This paper considers a fundamental question about the school environment - what are the long run effects of a student's ordinal rank in elementary school? Using administrative data from all public school students in Texas, we show that students with a higher third grade academic rank, conditional on ability and classroom effects, have higher subsequent test scores, are more likely to take AP classes, graduate high school, enroll in college, and ultimately have higher earnings 19 years later. Given these findings, the paper concludes by exploring the tradeoff between higher quality schools and higher rank.

Keywords:

rank; education; subject choice

JEL-Classification:

I20; I23; I28

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Discussion Paper No. 117
September 17, 2018

Can Online Surveys Represent the Entire Population?

Authors:

Grewenig, Elisabeth (ifo Institute)
Lergetporer, Philipp (ifo Institute)
Simon, Lisa (ifo Institute)
Werner, Katharina (ifo Institute)
Woessmann, Ludger (ifo Institute and LMU Munich)

Abstract:

A general concern with the representativeness of online surveys is that they exclude the "offline" population that does not use the internet. We run a large-scale opinion survey with (1) onliners in web mode, (2) offliners in face-to-face mode, and (3) onliners in face-to-face mode. We find marked response differences between onliners and offliners in the mixed-mode setting (1 vs. 2). Response differences between onliners and offliners in the same face-to-face mode (2 vs. 3) disappear when controlling for background characteristics, indicating mode effects rather than unobserved population differences. Differences in background characteristics of onliners in the two modes (1 vs. 3) indicate that mode effects partly reflect sampling differences. In our setting, re-weighting online-survey observations appears a pragmatic solution when aiming at representativeness for the entire population.

Keywords:

online survey; representativeness; mode effects; offliner; public opinion

JEL-Classification:

C83; D91; I20

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