Labor Adjustment under Different Institutional Structures: A Case Study of Germany and the United States
In: Institutional Frameworks and Labor Market Performance: Comparative Views on the U.S. and German Economies
AbstractLike most Western European countries, Germany stringently regulates dismissals and layoffs. Critics contend that this regulation raises the costs of employment adjustment and hence impedes employers' ability to respond to fluctuations in demand. Other German labor policies, however, most especially the availability of unemployment insurance benefits for those on short time, facilitate the adjustment of average hours per worker in lieu of layoffs. Building on earlier work, we compare the adjustment of employment, hours and inventories to demand shocks in the German and U.S. manufacturing sectors. We find that, in the short run, whereas U.S. employers rely principally on the adjustment of employment levels to respond to demand shocks, German employers rely principally on the adjustment of average hours per worker. The adjustment of overall labor input is generally similar in the two countries. Short-time work makes a very important contribution to short-run hours adjustment in Germany. We find little evidence that inventories help to buffer demand fluctuations in either country. Our findings suggest that, given appropriate supporting institutions, strong worker job security can be compatible with employers' need for flexibility in staffing levels.
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This chapter was published in: Friedrich Buttler & Wolfgang Franz & Ronald Schettkat & David Soskice (ed.) Institutional Frameworks and Labor Market Performance: Comparative Views on the U.S. and German Economies, Routledge, pages 285-315, 1995.
This item is provided by W.E. Upjohn Institute for Employment Research in its series Book chapters authored by Upjohn Institute researchers with number snhkga19952.
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wage labor adjutment; labor supply; Germany;
Other versions of this item:
- Susan N. Houseman & Katharine G. Abraham, 1993. "Labor Adjustment Under Different Institutional Structures: A Case Study of Germany and The United States," NBER Working Papers 4548, National Bureau of Economic Research, Inc.
- Susan N. Houseman & Katharine G. Abraham, 1994. "Labor Adjustment Under Different Institutional Structures: A Case Study of Germany and the United States," Upjohn Working Papers and Journal Articles 94-26, W.E. Upjohn Institute for Employment Research.
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Book chapters authored by Upjohn Institute researchers,
in: Rebecca M. Blank (ed.), Social Protection Versus Economic Flexibility: Is There a Trade-off?, pages 59-93
W.E. Upjohn Institute for Employment Research.
- Katharine G. Abraham & Susan N. Houseman, 1994. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium," NBER Chapters, in: Social Protection versus Economic Flexibility: Is There a Trade-Off?, pages 59-94 National Bureau of Economic Research, Inc.
- Katharine G. Abraham & Susan N. Houseman, 1993. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium," NBER Working Papers 4390, National Bureau of Economic Research, Inc.
- Katherine G. Abraham & Susan N. Houseman, 1993. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France and Belgium," Upjohn Working Papers and Journal Articles 93-16, W.E. Upjohn Institute for Employment Research.
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