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The recent economic policy debate in Germany emphasizes the impact of globalization of the world economy on the German labor market. This paper provides an empirical analysis of the relationship between trade and the labor market in West Germany for the period from 1970 until German reunification in 1990. Building on the emphasis of trade theory on relative output prices as the major transmission channel of trade effects on the labor market, the empirical analysis first develops a series of empirical regularities characterizing trends in trade, total factor productivity growth, and labor markets. Then building on Learner (1996), a more structural analysis identifies empirically the qualitative effects of trade and total factor productivity growth. The analysis allows for three skill types of labor. The major empirical findings are that, relative to skilled labor, wages were increasing disproportionately both for low- and highskilled labor whereas employment trends were favoring higher skill levels monotonically. Import competition as well as total factor productivity were increasing disproportionately in those industries using low- or high-skilled labor-intensively. These results are consistent with trade effects dominating for low-skilled labor and technology effects for high-skilled labor. At the same time, the wage bargaining institutions were holding up relative wages of low-skilled labor which accounts for the disproportionate increase of unemployment for this group. The empirical analysis merges national account data for 49 industries with the "IAB-Beschaftigtenstichprobe", a 1% random sample from German social security accounts, which has become available only recently.

AbstractEmployment rates of women have been rising but women are often part‐time employed and employment interruptions over the life‐cycle are linked to family formation. This paper analyzes empirically full‐time and part‐time employment of different skill groups of women in the UK and West Germany. Patterns of part‐time and full‐time employment are different across skill groups and countries. Full‐time employment declines and part‐time employment increases with age. Time trends do not change in a monotonous way across skill groups and they differ by country. The strong increase in part‐time rates in both countries over time can mainly be attributed to composition effects.

In order to reduce unemployment, it is often recommended that industry‐level wage bargaining in Germany should be replaced by a more decentralized system. This paper provides a critical assessment of the current wage bargaining institutions and re‐examines the case for a more decentralized system. Based on a theoretical model integrating Insider–Outsider aspects into the comparison, the uniformly superior employment performance of a decentralized wage bargaining system is questioned. We conclude that, rather than solely trying to decentralize wage bargaining, a promising policy option may be to improve the skills of the unemployed by efficient labour market policies and to foster institutional reforms such that wage bargaining takes account of the long‐run employment consequences of wage setting.

In order to reduce unemployment, it is often recommended that industry-level wage bargaining in Germany should be replaced by a more decentralized system. This paper provides a critical assessment of the current wage bargaining institutions and reexamines the case for a more decentralized system. Based on a theoretical model integrating Insider-Outsider aspects into the comparison, the unformly superior employment performance of a decentralized wage bargaining system is questioned. We conclude that, rather than solely trying to decentralize wage bargaining, a promising policy option may be to improve the skills of the unemployed by efficient labour market policies and to foster institutional reforms such that wage bargaining takes account of the long-run employment consequences of wage setting.

We argue that in labor markets with central wage bargaining wage flexibility varies systematically across the wage distribution: local wage flexibility is more relevant for the upper part of the wage distribution, and flexibility of wages negotiated under central wage bargaining affects the lower part of the wage distribution. Using a random sample of German social{security accounts, we estimate wage flexibility across the wage distribution by means of quantile regressions. The results support our hypothesis, as employees with low wages have significantly lower local wage flexibility than high wage employees. This effect is particularly relevant for the lower educational groups. On the other hand, employees with low wages tend to have a higher wage flexibility with respect to national unemployment.