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Shocking Germany – A spatial analysis of German regional labor markets

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  • Oliver Krebs

Abstract

This paper quantifies the surprisingly large heterogeneity of real income and employment effects across German counties in response to local productivity shocks. Using a quantitative model with imperfect mobility and sector-specific labor market frictions together with an outstanding data set of county level goods shipments, I identify the sources of the heterogeneity in Germany’s complex interregional linkages. I find that population mobility reduces the magnitude of local employment rate responses by a striking 70 percent on average. In all but a few counties, changes in the sectoral composition of production have a much milder effect on employment elasticities. National employment rates are less dependent on mobility with worker in- and outflows in individual counties partially cancelling out effects. For productivity shocks affecting individual sectors across all regions the composition effect is substantially magnified, the mobility effect reduced. In line with recent real world observations I find that real income and employment effects, while correlated, do not need to be of the same sign. Finally, the spatial propagation of real income effects closely follows trade linkages whereas employment effects are more complex to predict.

Suggested Citation

  • Oliver Krebs, 2018. "Shocking Germany – A spatial analysis of German regional labor markets," Working Papers 183, Bavarian Graduate Program in Economics (BGPE).
  • Handle: RePEc:bav:wpaper:183_krebs
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    File URL: https://bgpe.cms.rrze.uni-erlangen.de/files/2023/07/183_Shocking-Germany--A-spatial-analysis-of-German-regional-labor-markets.pdf
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    References listed on IDEAS

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    Cited by:

    1. Oliver Krebs, 2018. "RIOTs in Germany – Constructing an interregional input-output table for Germany," Working Papers 182, Bavarian Graduate Program in Economics (BGPE).

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    More about this item

    Keywords

    Quantitative spatial analysis; unemployment; migration; search and matching; labor market frictions;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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