CHAIR OF

PUBLIC ECONOMICS

Wage subsidies can help to create employment and reduce unemployment by lowering labor costs and increasing labor demand. A problem of wage subsidies is, however, that they might give rise to higher wage claims by labor unions. The resulting increase in labor costs would reduce the initially positive employment effect of the wage subsidies. In a recent research article, Andreas Knabe and Ronnie Schöb (FU Berlin) show that the shifting of the subsidy into higher wages can be reduced if the subsidy is granted only for marginal, i.e. additional, employment. With this restriction, the employment-creation effect of wage subsidies can be maintained.

The publication can be found here.

Migrants in Germany suffer from a substantially lower life satisfaction when they live in regions where the native population has xenophobic or racist attitudes. This negative effect is even stronger for highly qualified migrants. As a result, migrants report to be less willing to stay in Germany. These findings were obtained in a recent study by Andreas Knabe, jointly written with Steffen Rätzel (formerly OVGU) and Stephan Thomsen (NIW Hannover). If Germany needs more skilled migrants to deal with the challenges of demographic change, which requires raising the attractiveness of Germany as an immigration country, this study suggests that it is important to reduce xenophobia among the native population and to promote a „culture of welcome“.

The publication can be found here.
The discussion paper can be found here.

Empirical and experimental research suggests that minimum wages cause spillovers to wages higher up in the wage distribution, i.e., they may even raise wages that were already above the new minimum wage. In this paper, we analyze how these findings can be explained by theoretical wage bargaining models between unions and firms. While the Nash bargaining solution is unaffected by minimum wages below initially bargained wages, we show that such minimum wages can drive up wages - and be harmful to employment - when bargaining follows the Kalai-Smorodinsky solution.

The publication can be found here.

The authors examine whether low-paid jobs have an effect on the occupational advancement probability of unemployed persons to obtain better-paid jobs in the future (stepping-stone effect). A previous version was awarded as best paper in the category Young Economists on the 24th Mondragone International Economic Seminar (Rome).

The publication is available here.
The discussion paper is available here.

The authors use the differences between life satisfaction and emotional well-being of employed and unemployed persons to analyze how a person’s employment status affects cognitive well-being. The results show that unemployment has a negative impact on cognitive, but not on affective well-being, which we interpret as a loss in identity utility. Living in a partnership strengthens the loss in identity utility of men, but weakens that of women. Unemployment of a person’s partner reduces the identity loss of unemployed men, but raises it for women. These results suggest that the unemployed’s feeling of identity is affected by traditional gender roles, while this does not seem to be the case for the affective part of their subjective well-being.

The publication can be found here.