Werner Smolny

Ulm University | UULM

The U-shaped hypothesis of the relation between economic development and female labor market participation has been a main framework for analyzing female labor market patterns. However, it mixes up two dimensions of development: the increase in income level and the development of social norms from traditional to modern. We disentangle the U-shaped...

This paper analyzes the role of labor market institutions for youth unemployment, as contrasted to total unemployment. The empirical results are basically consistent with an insider view of labor market institutions. Labor market institutions tend to protect (older) employees but might harm (young) entrants. Remarkable is especially the significant...

Despite rapid economic integration and massive help from the Federal Government East German productivity catching up faded out in the nineties. This paper presents panel-data estimates of the productivity adjustment based on a production function framework and a stylized adjustment model of the economy. The central empirical result is a decompositi...

Despite rapid economic integration and massive help from the Federal Government, large wage differences between East and West Germany still persist. We ask whether those differences are related to disadvantageous locational conditions in East Germany or could be found in the characteristics of the people living there. This article analyses income a...

German unification and the subsequent breakdown of economic activity in East Germany initiated enormous migration flows from East to West Germany. People from East Germany moved towards West Germany, where wages are higher and employment opportunities are more favourable. Our paper takes a somewhat broader perspective; it analyses migration flows b...

The economic development in East Germany after unification shows both, success and failure. In the early nineties wages and productivity increased fast; later on catching up faded out. A central question from a policy viewpoint is whether this fading out indicates a reduction of the adjustment speed or an equilibrium gap. This points towards a stat...

Nearly 20 years after unification large differences of the labor market situation in East and West Germany persist. Wages are still considerably lower, the unemployment rate is about twice of the West German level, and the competitiveness of the East German economy seems to be low. This paper analyzes the process of (relative) wage adjustment in Ea...

"Despite the currently improving economic forecasts, the present labour market situation in Germany does not look too good. Especially the high and further increasing unemployment in eastern Germany is a key problem for current economic policy. Rigidities on the labour market, which manifest themselves among other things in wage setting which is no...

In this paper, the determinants of innovation behaviour and investment are explored with a large micro-data panel from West-German manufacturing firms. The estimates are discussed within a microeconomic model with monopolistic competition, demand uncertainty and a delayed adjustment of capacities and the production technology. The estimates reveal...

In this paper, employment adjustment at the firm level is estimated with a large panel of business survey data from West German manufacturing. The specification is based on a framework of monopolistic competition in the product market. Special emphasis is devoted to the analysis of the impact of demand uncertainty, capacity constraints, technologic...

The price-setting behaviour of firms and the adjustment of prices with respect to changes in the economic environment is relevant for the short-run analysis of the business cycle as well as for the analysis of the long-run development of the market. In this paper, a theoretical model of the price adjustment of the firm is developed and estimated wi...

Many theoretical analyses of the sources of economic growth focus on knowledge spillovers and scale economies to explain growth endogenously. The contribution of this paper is to shed some light on these arguments by an empirical investigation based on a production function framework. Sectoral production functions are estimated with annual German d...

In this paper, it is shown that aggregate cross-country analyses of the growth process of the industrial countries should take reconstruction effects into account. The enormous growth rates in many European countries and in Japan in the fifties which often appear as outliers in aggregate analyses of productivity convergence can be understood as a c...

“… we believe that most technological progress requires, at least at some stage, an intentional investment of resources by profit-seeking firms or entrepreneurs.” 1

“Research firms are motivated by the prospect of monopoly rents that can be captured when a successful innovation is patented. But those rents will be destroyed by the next innovation… ”1

“A key economic issue is whether poor countries or regions tend to grow faster than rich ones: are there automatic forces that lead to convergence over time in the levels of per capita income and product?”1

In this chapter, the sources of productivity growth are investigated by an empirical analysis with micro data for West-German manufacturing firms. The starting point of the study is the large residual left after standard procedures of growth accounting, i.e. standard growth models leave most of observed growth unexplained.1 A convenient way to deal...

“Technological advance has probably been the major influence on the nature of the lives that we lead relative to the lives that our forebears had and our children and grandchildren will have.”1

The ifo firm panel includes a large set of data for West German manufacturing firms from 1980-92 which permits a detailed analysis of firm behaviour. In this paper, estimates of the impact and the determinants of innovation behaviour are presented. The empirical results reveal that innovative firms exhibit more output and employment growth than non...

The macroeconomic development in West Germany in the aftermath of unification was characterized by a boom period in 1990/1991, a deep recession in 1992/1993 and a slow recovery since then. In East Germany, in contrast, unification induced a breakdown of production and employment followed by a slow recovery starting in 1992. In this paper, a macroec...

Unification fundamentally changed the terms of quantitative macroeconomic analysis for Germany. Two main areas concerned are data availability for the eastern part of Germany and structural changes within the behavioural equations after unification. Our paper presents results from the estimation of a macroeconometric disequilibrium model formerly d...

In the paper, productivity convergence is analyzed with a broad panel of industry sector data for the United States and Germany 1960–1990. The time-series/cross-sectoral data set permits us to investigate country-specific catching-up and to control for sector-specific differences in human capital and factor utilization. It is found that the product...

In this paper, a theoretical model of the impact of product and process innovations on output, capacity utilization, employment, and prices is developed. The model is estimated with a unique set of microdata from West German manufacturing firms. The empirical results reveal that innovative firms are more successful. They show a higher utilization a...

In this paper, a dynamic decision model of the firm with a delayed adjustment of employment and investment is developed. Special attention is devoted to dynamic inefficiencies, i.e. underutilizations of the capital stock and labour hoarding. Market disequilibrium is introduced by allowing for a sluggish adjustment of wages and prices. The model of...

In the paper, the sources of productivity g r o wth are investigated by an empir-ical analysis with micro data for West-German manufacturing rms. The the-oretical framework corresponds to an augmented growth accounting approach based on a production function. The empirical results reveal that innovative rms exhibit more productivity increases. Larg...

A model of the firm with a delayed adjustment of prices and employment is analyzed. Prices and employment are determined under uncertainty about the location of the demand curve. Three models are distinguished: price setting with predetermined supply, employment determination with pre-determined prices, and a simultaneous price and employment deter...

Two lines of research in macroeconomics and business cycle theory can be distinguished.1 Until 1970, macroeconomic theory was dominated by Keynesian models. In Keynesian models, cyclical changes in output and employment are attributed to demand changes. These demand fluctuations are transmitted by the multiplier-accelerator mechanism, and the adjus...

In the preceding chapters, the analysis of the model was limited to the behaviour of one firm. It has been shown that different rationing situations on the goods and labour market are possible and that the firm’s choice of employment and capacities, together with the properties of the distribution function, determine the probabilities of the regime...

This chapter is devoted to the discussion of possible extensions of the model developed in chapter 2. In the basic model, some restrictive assumptions were applied in order to keep the analysis simple. Now, three important aspects are introduced in the model. Of course, this cannot include all interesting extensions and the analysis is concentrated...

The first part of this work was devoted to the development of a theoretical model of the firm. The behaviour of a profit maximizing firm facing different constraints was derived, and an aggregation procedure for firms in different regimes was presented. Now it is tried to evaluate this model with an empirical application for the Federal Republic of...

In this work, a disequilibrium model of firms’ behaviour has been developed. Disequilibrium analysis has been practiced in both meanings of the term. A dynamic model of the firm has been worked out, which pays special attention to a delayed adjustment of employment, investment, and the production technology. Market disequilibrium is introduced by a...

The presentation of the estimation results starts with a discussion of the productivity equations. These equations serve different functions within the model of the firm. First, the substitution decision is the most important channel, how relative factor prices influence investment and labour demand. Second, the estimation results of the productivi...

In this chapter, a disequilibrium model of the behaviour of the firm is developed. As in the models of the New Keynesian Macroeconomics, the fix-price method is applied, because quantity constraints are considered as more important for the business cycle than endogenous wage and price setting. In contrast to these models of general (dis)-equilibriu...

Recent experience with increasing labour supply coming from outside the FRG enhances interest in the economic effect of these supply shocks. This paper analyses the consequences of guest workers’ immigration in the sixties and seventies using a macroeconometric disequilibium model. Within the rationing context the derivation of nonlinear multiplier...

In this paper a theoretical model of the price versus quantity adjustment of the firm is developed. The model is characterized by short-run capacity constraints, uncertainty about demand and imperfect competition on the product market. The microeconomic model is complemented by aggregation. The aggregate model exem- plifies the prominent role of ca...

After German unification large income differentials between East and West Germany led to massive commuting and migration flows. In this paper we analyze commuting and migration empirically by looking for determinants and effects on income using data from the German Socio-Economic Panel. We examine differences between east-west as well as west-east...

Firms may face financing constraints as a result of rational behaviour of potential lenders due to asymmetric information. In this article, a theoretical model of employment adjustment is developed to derive hypotheses on the short-run impact of financing constraints on employment at the firm level. A unique firm panel data set for German manufactu...