Sectoral Transformation, Turbulence and Labor Market Dynamics in Germany

Ronald Bachmann 1  and Michael C. Burda 2 , 3 , 4
  • 1 RWI Essen,, Essen, Germany
  • 2 Humboldt-Universität,, Berlin, Germany
  • 3 IZA, Schaumburg-Lippe-Straße 5-9,, Bonn, Germany
  • 4 CEPR, 33 Great Sutton St, Clerkenwell,, London, United Kingdom of Great Britain and Northern Ireland

Abstract

This paper analyzes the interaction between structural change and labor market dynamics in West Germany, during a period when industrial employment declined by more than 30% and service sector employment more than doubled. Using transition data on individual workers, we document a marked increase in structural change and turbulence, in particular since 1990. Net employment changes resulted partly from an increase in gross flows, but also from an increase in the net transition ‘yield’ at any given gross worker turnover. In growing sectors, net structural change was driven by accessions from nonparticipation rather than unemployment; contracting sectors reduced their net employment primarily via lower accessions from non-participation. German reunification and Eastern enlargement appear to have contributed significantly to this accelerated pace of structural change.

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German Economic Review (GER), the official publication of the German Economic Association (Verein für Socialpolitik), is an international journal publishing original and rigorous research of general interest in a broad range of economic disciplines. The scope of research approaches includes theoretical, empirical and experimental work.

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