Offshoring, Domestic Employment and Production. Evidence from the German International Sourcing Survey
Wolfhard Kaus, Markus Zimmermann
IWH Discussion Papers,
No. 14,
2022
Abstract
This paper analyses the effect of offshoring (i.e., the relocation of activities previously performed in-house to foreign countries) on various firm outcomes (domestic employment, production, and productivity). It uses data from the International Sourcing Survey (ISS) 2017 for Germany, linked to other firm level data such as business register and ITGS data. First, we find that offshoring is a rare event: In the sample of firms with 50 or more persons employed, only about 3% of manufacturing firms and 1% of business service firms have performed offshoring in the period 2014-2016. Second, difference-in-differences propensity score matching estimates reveal a negative effect of offshoring on domestic employment and production. Most of this negative effect is not because the offshoring firms shrink, but rather because they don’t grow as fast as the non-offshoring firms. We further decompose the underlying employment dynamics by using direct survey evidence on how many jobs the firms destroyed/created due to offshoring. Moreover, we do not find an effect on labour productivity, since the negative effect on domestic employment and production are more or less of the same size. Third, the German data confirm previous findings for Denmark that offshoring is associated with an increase in the share of ‘produced goods imports’, i.e. offshoring firms increase their imports for the same goods they continue to produce domestically. In contrast, it is not the case that offshoring firms increase the share of intermediate goods imports (a commonly used proxy for offshoring), as defined by the BEC Rev. 5 classification.
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26.04.2022 • 10/2022
Regional effects of a recession in Germany triggered by an import stop for Russian gas
A halt in Russian gas deliveries would lead to a recession in the German economy. Not all regions would be equally affected: The Halle Institute for Economic Research (IWH) expects a significantly stronger slump in economic output in regions where the manufacturing sector has a large weight than elsewhere.
Oliver Holtemöller
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Firm-specific Forecast Errors and Asymmetric Investment Propensity
Manuel Buchholz, Lena Tonzer, Julian Berner
Economic Inquiry,
No. 2,
2022
Abstract
This paper analyzes how firm-specific forecast errors derived from survey data of German manufacturing firms over 2007–2011 relate to firms' investment propensity. Our findings reveal that asymmetries arise depending on the size and direction of the forecast error. The investment propensity declines if the realized situation is worse than expected. However, firms do not adjust investment if the realized situation is better than expected suggesting that the uncertainty component of the forecast error counteracts good surprises of unexpectedly favorable business conditions. This asymmetric mechanism can be one explanation behind slow recovery following crises.
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Micro-mechanisms behind Declining Labor Shares: Rising Market Power and Changing Modes of Production
Matthias Mertens
International Journal of Industrial Organization,
March
2022
Abstract
I derive a micro-founded framework showing how rising firm market power on product and labor markets and falling aggregate labor output elasticities provide three competing explanations for falling labor shares. I apply my framework to 20 years of German manufacturing sector micro data containing firm-specific price information to study these three distinct drivers of declining labor shares. I document a severe increase in firms’ labor market power, whereas firms’ product market power stayed comparably low. Changes in firm market power and a falling aggregate labor output elasticity each account for one half of the decline in labor's share.
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14.10.2021 • 26/2021
East German economy less affected by supply bottlenecks than German economy as a whole, but lower vaccination rates pose risks – Implications of the Joint Economic Forecast Autumn 2021 and of Länder data from recent publications of the Federal Statisti
Supply bottlenecks affect production in the manufacturing sector in East Germany somewhat less than in Germany as a whole. With 1.8%, the increase in Gross Domestic Product in eastern Germany in 2021 therefore is likely to be lower than in Germany as a whole (2.4%); this gap is likely to enlarge in 2022, when supply bottlenecks hamper less (East Germany: 3.6%, Germany 4.8%).
Oliver Holtemöller
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14.10.2021 • 25/2021
Crisis is gradually being overcome – align actions to lower growth
The Corona pandemic still shapes the economic situation in Germany. A complete normalisation of contact-intensive activities is not to be expected in the short term. In addition, supply bottlenecks are hampering manufacturing for the time being. The German economy will reach normal capacity utilisation in the course of 2022. In their autumn report, the leading economic research institutes forecast that Gross Domestic Product (GDP) will rise by 2.4% in 2021 and by 4.8% in 2022.
Oliver Holtemöller
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06.10.2021 • 24/2021
IWH Bankruptcy Update: Bankruptcy Figures Remain Low; More Manufacturing Jobs Impacted
The number of corporate bankruptcies in Germany remained near to a historic low in September. However, there was a considerable increase in the share of manufacturing jobs impacted by bankruptcy. These are the key findings of the IWH Bankruptcy Update, published by the Halle Institute for Economic Research (IWH), which provides monthly statistics on corporate bankruptcies in Germany.
Steffen Müller
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What Drives the Commodity-Sovereign Risk Dependence in Emerging Market Economies?
Hannes Böhm, Stefan Eichler, Stefan Gießler
Journal of International Money and Finance,
March
2021
Abstract
Using daily data for 34 emerging markets in the period 1994–2016, we find robust evidence that higher export commodity prices are associated with lower sovereign default risk, as measured by lower EMBI spreads. The economic effect is especially pronounced for heavy commodity exporters. Examining the drivers, we find that, first, commodity dependence is higher for countries that export large volumes of commodities, whereas other portfolio characteristics like volatility or concentration are less important. Second, commodity-sovereign risk dependence increases in times of recessions and expansionary U.S. monetary policy. Third, the importance of raw material prices for sovereign financing can likely be mitigated if a country improves institutions and tax systems, attracts FDI inflows, invests in manufacturing, machinery and infrastructure, builds up reserve assets and opens capital and trade accounts. Fourth, the country’s government indebtedness or amount of received development assistance appear to be only of secondary importance for commodity dependence.
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Robot Adoption at German Plants
Liuchun Deng, Verena Plümpe, Jens Stegmaier
Abstract
Using a newly collected dataset of robot use at the plant level from 2014 to 2018, we provide the first microscopic portrait of robotisation in Germany and study the potential determinants of robot adoption. Our descriptive analysis uncovers five stylised facts concerning both extensive and, perhaps more importantly, intensive margin of plant-level robot use: (1) Robot use is relatively rare with only 1.55% German plants using robots in 2018. (2) The distribution of robots is highly skewed. (3) New robot adopters contribute substantially to the recent robotisation. (4) Robot users are exceptional along several dimensions of plant-level characteristics. (5) Heterogeneity in robot types matters. Our regression results further suggest plant size, low-skilled labour share, and exporter status to have strong and positive effect on future probability of robot adoption. Manufacturing plants impacted by the introduction of minimum wage in 2015 are also more likely to adopt robots. However, controlling for plant size, we find that plant-level productivity has no, if not negative, impact on robot adoption.
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The East-West German Gap in Revenue Productivity: Just a Tale of Output Prices?
Matthias Mertens, Steffen Müller
Abstract
East German manufacturers’ revenue productivity (value-added per worker) is some 8 (25) percent below West German levels, even three decades after German unification. Using firm-product-level data containing information on product quantities and prices, we analyse the role of product specialisation and reject the prominent ‚extended work bench hypothesis‘, stating a specialisation of Eastern firms in the intermediate input production as explanation for these sustained productivity differences. We decompose the East’s revenue productivity disadvantage into Eastern firms selling at lower prices and producing more physical output for given amounts of inputs within ten-digit product industries. This suggests that Eastern firms specialise vertically in simpler product varieties generating less consumer value but being manufactured with less or cheaper inputs. Vertical specialisation, however, does not explain the productivity gap as Eastern firms are physically less productive for given product prices, implying a genuine physical productivity disadvantage of Eastern compared to Western firms
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