P9

Project Leaders:
Prof. Dr. Olaf Hübler, Universität Hannover
Prof. Dr. Knut Gerlach, Universität Hannover
PD Dr. Gesine Stephan, IAB Nürnberg

Project Assistants: 
Dipl.-Ök. Thomas Cornelißen, University of Essex
Dipl.-Volksw. Stefan Schneck, Institut für Mittelstandsforschung Bonn

The project aims at analysing the trade-off between mobility and stability in employment relationships. The analysis adopts the perspectives of both, employers and employees. The effect of institutional labour market arrangements is also taken into account. In principle, stable employment relationships can have assets and drawbacks for employers and employees. While employees dislike the risk of being laid off, they reserve the right to quit in order to grasp career opportunities. While firms need to be able to respond to product market shocks by adjusting labour demand, it is also in their interest to retain workers with firm-specific skills in order to avoid frequent reinvesting in worker skills. Furthermore, long-term employment relationships put firms into the position to provide work incentives, e.g. by implementing seniority or tournament pay.

One important task of the project is to identify heterogeneous groups of workers and firms that differ with respect to mobility and stability. Are mobility decisions of skilled and unskilled workers or young and old persons systematically different? What are the causes for flexible and for stable employment relationships and under which conditions do they become prevalent?

The present (second) stage of the project highlights three thematic areas:

1. The interaction between firm decisions and employee decisions
Linked employer-employee data sets provide the opportunity to analyse at the same time individual and firm characteristics as well as their interaction as determinants of mobility and stability decisions. We use German linked employer-employee data (LIAB) to analyze the interaction of unobserved worker and firm heterogeneity in wage and job stability equations. The interaction of worker and firm effects from wage and tenure equations sheds light on the sorting of workers into firms according to unobserved (to the researcher) characteristics of workers and firms.

2. Job characteristics, job satisfaction and mobility
The German Socio-Economic Panel (GSOEP) is used in order to study the effect of a broad range of job characteristics on job satisfaction and mobility (job search and quits). One aim is to analyse whether those job characteristics that have a strong impact on job satisfaction also have a strong impact on job search and quits, or whether there are different effects.

3. Cycles and trends in labour mobility This part of the research is intended to shed light on two important questions: (i) Has labour mobility increased in Germany in recent years and, if so, at what point of time did it start to increase? (ii) Which differences in labour mobility are there between cyclical upswings and downturns? The empirical investigation will be based on micro data the German Socio-Economic Panel (GSOEP). Aggregated data would not be suitable for the analysis. German linked-employer employee data (LIAB) does not yet cover a sufficiently long time span to identify cycles and trends. Descriptive evidence on labour mobility over time will complement multivariate econometric estimations.