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Does the Use of Worker Flows Improve the Analysis of Establishment Turnover? Evidence from German Administrative Data

  • Hethey-Maier, Tanja

    ()

    (Institute for Employment Research (IAB), Nuremberg)

  • Schmieder, Johannes F.

    ()

    (Boston University)

Economists have long been interested in analyzing entries and exits of establishments. In many countries administrative datasets provide an excellent source for detailed analysis on a fine and disaggregate level. However, administrative datasets are not without problems: restructuring and relabeling of firms is often poorly measured and can potentially create large biases. Information on worker flows between establishments can potentially alleviate these measurement issues, but it is typically hard to judge how well correction algorithms based on this methodology work. This paper evaluates the use of the worker flow methodology using a dataset from Germany, the Establishment History Panel (BHP), merged to information on all worker flows between establishment IDs and survey data. We first document the extent of misclassification that stems from relying solely on the first and last appearance of the establishment identifier (EID) to identify openings and closings. We show that the misclassification bias of using only the EID is very severe: Only about 35 to 40 percent of new and disappearing EIDs with more than 3 employees are likely to correspond to real establishment entries and exits. Among larger establishments misclassification is even more common. We provide 3 pieces of evidence that using a classification system based on worker flows is superior to using EIDs only: First, establishment birth years generated using the worker flow methodology is much higher correlated with establishment birth years from an independent survey. Second, establishment entries and exits which are identified using the worker flow methodology move closely with the business cycle, while events which are identified as simple ID changes are not. Third, establishment exits have a big negative impact on workers' earnings trajectories which is not present for ID changes.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7672.

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Length: 45 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:iza:izadps:dp7672
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  1. Lars Vilhuber, 2009. "Adjusting Imperfect Data: Overview and Case Studies," NBER Chapters, in: The Structure of Wages: An International Comparison, pages 59-80 National Bureau of Economic Research, Inc.
  2. John M. Abowd & Lars Vilhuber, 2002. "The Sensitivity of Economic Statistics to Coding Errors in Personal Identifiers," Longitudinal Employer-Household Dynamics Technical Papers 2002-17, Center for Economic Studies, U.S. Census Bureau, revised Mar 2003.
  3. Teresa C Fort & John Haltiwanger & Ron S Jarmin & Javier Miranda, 2013. "How Firms Respond to Business Cycles: The Role of Firm Age and Firm Size," IMF Economic Review, Palgrave Macmillan, vol. 61(3), pages 520-559, August.
  4. Lucia Foster & Cheryl Grim & John Haltiwanger, 2013. "Reallocation In The Great Recession: Cleansing Or Not?," Working Papers 13-42, Center for Economic Studies, U.S. Census Bureau.
  5. Benedetto, Gary & Haltiwanger, John & Lane, Julia & McKinney, Kevin, 2007. "Using Worker Flows to Measure Firm Dynamics," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 299-313, July.
  6. Bauer, Thomas K. & Schmucker, Alexandra & Vorell, Mathias, 2008. "KMU und Arbeitsplatzdynamik : eine Analyse auf Basis der Beschäftigten-Historik-Datei," IAB Discussion Paper 200802, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  7. Till von Wachter & Jae Song & Joyce Manchester, 2008. "Long-Term Earnings Losses due to Job Separation During the 1982 Recession: An Analysis Using Longitudinal Administrative Data from 1974 to 2004," Discussion Papers 0708-16, Columbia University, Department of Economics.
  8. Brixy, Udo, 2008. "Welche Betriebe werden verlagert? : Beweggründe und Bedeutung von Betriebsverlagerungen in Deutschland," IAB Discussion Paper 200839, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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