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This paper develops and implements a new benchmarking approach for labor market regions. Based on panel data for regions, we use nonparametric matching techniques to account for observed labor market characteristics and for spatial proximity. As the benchmark, we estimate the counterfactual distribution of labor market outcomes for a region based on outcomes of similar regions. This allows to measure both the rank (relative performance) and the absolute performance based on the actual outcome for a region. Our outcome variable of interest is the hiring rate among the unemployed. We implement different similarity measures to account for differences in labor market conditions and spatial proximity, and we choose the tuning parameters in our matching approach based on a cross-validation procedure. The results show that both observed labor market characteristics and spatial proximity are important features to successfully match regions. Specifically, the modified Zhao (2004) distance measure and geographic distance in logs work best in our applications. Our estimated performance measures remain quite stable over time.

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.

This paper studies the relationship between employment and wage structures in West Germany based on the IAB employment subsample 1975{1997. It extends the analytical framework of Card and Lemieux (2001) which simultaneously includes skill and age as important dimensions of heterogeneity. After having identified cohort effects in skill wage premia and in the evolution of relative employment measures, we estimate elasticities of substitution between employees in three different skill groups and between those of different age, taking account of the endogeneity of wages and employment. Compared to estimates in the related literature, we find a rather high degree of substitutability. Drawing on the estimated parameters, we simulate the magnitude of wage changes within the respective skill groups that would have been necessary to halve skill-specific unemployment rates in 1997. The required nominal wage reductions range from 8.8 to 12.2% and are the higher the lower the employees' skill level.

Equilibrium search theory suggests that the wage distribution in a cross section of workers is closely related to labor market transitions and associated wage changes. Accordingly, jobtojob transitions are central in explaining the wage distribution. This paper uses the IAB employment subsample to describe the empirics of labor market transitions and the wage structure in Germany. Motivated by search theory, we use the data to explore descriptively labor market transitions and features of the wage structure. We find that labor market transition rates vary substantially over the business cycle and with individual characteristics. Regarding jobtojob transitions, we find considerable wage changes. Most job changes involve considerable gains, but a number of individuals incurs a remarkable loss. Regarding the wage structure, we find strong effects of jobtojob transitions, age, and education on wage mobility. Based on our descriptive analysis, we conclude that indeed a close relationship exists between wages and labor market transitions as predicted by search theory. However, the noticeable share of wage losses following jobtojob changes contradicts a simple search theoretic perspective.