Impacts of Labor Market Policies: Evidence Using German Firm-Level Data



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This thesis is the combination of two papers on the impact of labor policies on firm employment and firm performance. Both papers analyze episodes of labor market deregulation in Germany using firm-level data. The first paper evaluates one episode of labor concessions in the form of workweek extensions for skilled employees (Pforzheim Agreement in 2004), whose aim was to protect jobs and prevent firms from relocating abroad. The results indicate that the Pforzheim Agreement was ineffective at saving jobs as total employment in the average firm decreased. The effect was heterogeneous by firm size and large firms benefited more. The second paper analyzes the 2002-2003 episode of temporary help sector deregulation, when the limitation on the length of the maximum period of assignment at the user firm was removed. Using region and firm level data, I find an increase in the demand for temporary help workers and a decrease in the number of permanent employees at both firm and region level. It is not clear whether this strategy helps decrease labor costs in the short run, but it helps avoid medium- and long-run non-wage labor costs, such as pensions and holiday allowances. There is no significant effect on firm performance.



Labor Market Deregulation, Workweek Extension, Temporary Help Sector Deregulation