We study the distributional effects of a monetary policy-induced firm-level credit supply shock on individual wages and employment. To this end, we construct a novel dataset that links worker employment histories to firms' bank credit relationships in Germany. We document that firms in relationships with banks that were more exposed to negative monetary policy rates in 2014 see a relative reduction in credit supply. A negative credit supply shock in turn is associated with lower firm-level average wages and employment. These effects are concentrated among distinct worker groups within firms, with initially lower-paid workers more likely to be fired and initially higher-paid workers more likely to receive wage cuts. At the same time, wages decline by more at initially higher-paying firms. Consequently, wage inequality within and between firms decreases. Our results suggest that monetary policy has important distributional effects in the labor market.
Firms are not necessarily geographically static, in fact, they sometimes move across space within an economy. We define three possible destination types for relocating firms: major cities (urbanization), urbanized districts (suburbanization), and rural districts (counterurbanization). In this paper, we document relocation activity into all types of spatial structures, however, suburbanization is the predominant pattern in Germany. The literature on relocations of firms mostly ignores that relocating firms and their motives to relocate could be vastly different depending on their destination region. In our empirical analyses, we therefore examine heterogeneities by spatial structure in terms of firm selection and regional attraction factors. Our results reveal that firms moving to major cities and those moving to urbanized or rural districts are vastly different from each other in terms of firm size, wage level, and knowledge intensity. Our regional-level analysis reveal that especially relocating firms to urbanized districts are attracted by lower business taxes in these regions, suggesting that the suburbanization patterns are largely driven by regional differences in the local business tax rates. In contrast, there is no evidence that lower population densities, industry concentration, or regional wage levels matter for any of the moving types.
When employers face a trade-off between growing large and paying low wages—that is, when they have monopsony power—some productive employers will decide to acquire fewer customers, forgo sales, and remain small. These decisions have adverse consequences for aggregate labor productivity. Using high-quality administrative data from Germany, we document that East German plants (compared to West German ones) face a steeper size-wage curve, invest less into marketing, and remain smaller. A model with labor market monopsony, product market power, and customer acquisition matching these features of the data predicts 10 percent lower aggregate labor productivity in East Germany.
Studying the relationship between neighborhoods and individual-level outcomes such as crime, labor market success, or intergenerational mobility has a long history in the social sciences. As local processes such as gentrification or residential mobility constantly change neighborhoods’ composition and spatial expansion, time-constant one-size-fits-all neighborhood measures fail to capture important local dynamics. This paper presents a flexible and data-driven approach for efficiently estimating overlapping and arbitrarily shaped neighborhoods with time-dynamic boundaries. Constructed in a two-stage clustering design, the first stage identifies homogeneous groups within a city (using an automated K-Means algorithm), while the second stage clusters homogeneous groups by spatial proximity (using the HDBSCAN algorithm). In an analysis of 86 million person-year observations from 76 German cities, the paper shows that a larger spatial expansion of neighborhoods with a high socioeconomic status negatively correlates with city crime cases, while higher neighborhood fragmentation and heterogeneity correlate positively with crime rates. The findings stress the importance of flexible neighborhood estimation techniques and the necessity to view neighborhoods as non-constant entities. By modeling contexts as such agentic players, the two-staged algorithm depicts a novel and transparent tool to consider the spatial embeddedness of individuals, firms, or regions in sociological research.
This paper compares the magnitude and stratification of motherhood employment penalties in France and Germany, two countries with contrasting institutional orientations towards maternal employment. While prior research has documented cross-national variation in the size of motherhood penalties, less is known about how macro-level contexts shape their stratification across socioeconomic groups. Using harmonized administrative employment data on 18,948 French and 72,632 German mothers, who were employed prior to first birth between 1997 and 2014, we estimate labour market participation trajectories for five years following childbirth. Across both countries, women with higher pre-birth income, higher education, and employment in higher-wage firms experience substantially smaller reductions in labour supply, with income emerging as the strongest stratifying dimension. Motherhood penalties are markedly smaller in France, amounting to less than one-third of the reduction observed in Germany. Yet penalties in France are more strongly stratified: mothers in the lowest income quintile experience participation losses 3.14 times larger than mothers in the highest quintile, compared to a ratio of 1.17 in Germany. Within Germany, East German mothers face smaller but more stratified penalties than West German mothers. Finally, we test whether the macro-level pattern of larger penalties associated with weaker stratification also generalizes to 65 NUTS-2 regions. We find no systematic association between the size and stratification of motherhood penalties at the regional level. The findings suggest that institutional contexts supporting high maternal employment reduce overall penalties but pose particular challenges for mothers from lower socio-economic backgrounds who reintegrate less rapidly into the labour market.
