IZA - Electronic Archive

On behalf of the "High Level Advisory Group of Experts on the Social Integration of Ethnic Minorities and their Full Participation in the Labour Market" and the European Commission, IZA has conducted intensive research on the social and labor market integration of ethnic minorities in the European Union. The IZA study was published today on the occasion of the closing conference of the High Level Group in Brussels, that also presented the final High Level Group Report "An Urgent Call for Better Social Inclusion".

Reviewing the existing challenges and established facts on the status of ethnic minorities across the European Union, the new IZA study details their diverse situation by means of 10 elaborated country case studies (based on background studies carried out by renowned country experts) and investigates the disadvantages caused by unfavourable attitudes of the natives using modern econometric methods. Further innovative instruments developed by IZA and employed in this study are the IZA Expert Opinion Survey among expert stakeholders, the review of an European-wide collection of 22 good practice integration initiatives, and a policy matrix to judge societal development and policy choices. The policy conclusions deal with potential strategies to overcome the barriers that ethnic minorities still face in the European labour markets of 2007 and are directed to private business, non-governmental organizations and the government.

"The report shows that initiatives to foster the labor market and social integration of ethnic majorities can work," said IZA Director Klaus F. Zimmermann. Successful actions take the specific situation of the respective ethnic minority into account. Effective measures use the right mixture of general and targeted integration measures. They should be balanced, complementary and reinforcing. General initiatives are necessary to create an institutional and social environment inhibiting discrimination and facilitating targeted action.

More information:
- IZA Research Report No. 16: Study on the Social and Labour Market Integration of Ethnic Minorities
- High Level Group Report "An Urgent Call for Better Social Inclusion"
- Conference Program, December 3-4, 2007

A. Falk, U. Sunde and T. Dohmen

A joint study by IZA Program Director Armin Falk (University of Bonn), Uwe Sunde and Thomas Dohmen (both IZA) in cooperation with brain scientists at the University of Bonn has been published in the renowned academic journal "Science". The research investigates whether relative wages in comparison to co-workers influence work incentives - as opposed to standard economic theory which assumes that only the absolute wage level matters.

For that purpose, the scientists conducted experiments with male probands in pairs asking them to perform a task and granting rewards for success. Throughout the experiment, the subjects’ brain activities were monitored using magnetic resonance tomographs. It turned out that the "reward center" in the human brain showed a stronger activation whenever a task was successfully solved while the co-worker received a lower wage for fulfilling the same task. Stated differently, it is not only the absolute wage level but also the relative wage level in comparison to co-workers that plays a key role with respect to individual job satisfaction.

The "Science" article is the result of intensive research cooperation between IZA and the University of Bonn.

More Information:
- "Science" article
- University of Bonn press release

From October 27-31, 2008, the 13th International Metropolis Conference will take place in Bonn, Germany and will be hosted by the Ministry for Intergenerational Affairs, Family, Women and Integration of the German State of North Rhine-Westphalia along with its partners.

The International Metropolis Project is a forum for bridging research, policy and practice on migration and diversity. It aims to enhance academic research capacity, encourage policy-relevant research on migration and diversity issues, and facilitate the use of that research by governments and non-governmental organizations.

The 2008 conference will explore the inter-relationships between migration, immigrant integration, and development. The focus will be on issues that are often lost when these general topics are discussed in isolation from one another. In this way the organizers aim to uncover new aspects of Metropolis' traditional areas of interest, new avenues for research, and areas for policy development that have been neglected in the past.

As a Bonn-based institute with a strong reputation in migration and integration research, IZA has offered to assist with the organization of the conference and will soon announce the details of its involvement. More information about the conference is available on the Metropolis 2008 homepage.

J. Svejnar

In December 2007, IZA Research Fellow Jan Svejnar (University of Michigan, Ann Arbor) launched his campaign to become Czech president, challenging incumbent Vaclav Klaus in the vote due in February 2008. An internationally renowned economist, Svejnar has been a member of the IZA research fellow network since 2004. He has co-authored a number of IZA Discussion Papers on labor market issues in transition and emerging economies. Svejnar, who holds both Czech and U.S. citizenships, is currently Professor of Business Administration, Director of the International Policy Center and Professor of Economics and Public Policy at the University of Michigan. He is an ardent supporter of economic reforms and deeper European integration. "Svejnar's decision to run for this high political office must be applauded. The necessary reform process in Europe would certainly benefit from his outstanding economic expertise," commented IZA Director Klaus F. Zimmermann.

Read also: "Czech economist Svejnar launches presidential bid" (Washington Post - December 14, 2007)

Richard B. Freeman, Klaus Zumwinkel, Horst Köhler, Klaus F. Zimmermann

This year's IZA Prize in Labor Economics was awarded to the U.S. economist Richard B. Freeman (Harvard University and London School of Economics), who has made a number of fundamental contributions that have monumentally shaped modern labor economics. The renowned IZA Prize honors Freeman's groundbreaking work on the sustainability of the welfare state and the role of trade unions in the labor market. His highly innovative studies address policy-relevant issues that have important implications for labor market reforms in Germany. The award ceremony was held on November 5, 2007, in Berlin with German Federal President Horst Köhler as the invited speaker.

More information:
- Press Release (PDF)
- Award Statement (PDF)
- Speech by President Köhler (in German) (PDF)
- Laudation by IZA Director Zimmermann (PDF)
- Video about Richard Freeman (WMV, 55MB)
- Interview with Richard Freeman on global capitalism, labor markets and inequality (Youtube video, 57:15)
- IZA Prize Homepage

According to a recent study by IZA Director Klaus F. Zimmermann and Karl Brenke (DIW Berlin), immigration from the new EU member states in Central and Eastern Europe to Germany has seen a strong increase over the past two years. This comes despite the fact that Germany - unlike most other EU members - still limits freedom of movement for workers from these countries. Net immigration has risen from 9,000 working-age individuals in 2003 to 32,000 in 2005 and 56,000 in 2006. Polish immigrants account for about 80 percent of this balance.

Many migrants have chosen self-employment to circumvent the barriers to labor mobility, while high-skilled workers have mostly moved to other destination countries. Nonetheless, the fact that the inflow of labor migrants has yielded positive labor market effects is an indication that Germany would be ill-advised to forgo the economic benefits of full labor mobility and the implementation of a demand-oriented immigration policy based on quotas and an effective selection system.

The study is available in German language as "Wochenbericht Nr. 44/2007" from DIW Berlin.

The Institut National de la Statistique (INSEE) and the Institut National des Etudes demographiques (INED) both repudiate allegations by SOS Racisme that a projected study by the two renowned Paris-based institutions on the status of 24,000 first and second generation migrants in France ("Trajectories and origins, inquiry on the diversity of the populations of France") had discriminatory goals and aimed at "ethnical statistics". An accordant declaration has been signed by almost 300 prominent researchers from all over the world, among which are IZA Director Klaus F. Zimmermann, Nobel Laureate and IZA Fellow James Heckman, IZA prize winners David Card and Richard Freeman as well as IZA Research Fellows Don DeVoretz and Gerard van den Berg.

The discussion about the planned study by INSEE and INED immediately affects the global debate on academic independence and the responsibility of dealing with sensitive data on migration and integration. IZA explicitly supports the position of INED and INSEE. The declaration is still open to sign for interested researchers. Please send an email with name, profession, institution to press@iza.org which will be forwarded promptly.

More information:
- INSEE/INED declaration (in French) and updated list of signees
- English translation
- INSEE press release
- SOS Racisme opinion

A recent IZA study finds that in September 2007 the German labor force has exceeded 40 million for the first time in history. IZA Director of Labor Policy Hilmar Schneider attributes this result to recent economic boom and the moderate wage agreements of the past years. According to the study, the Hartz reforms have also contributed to the rise in employment by lowering individual reservation wages and accelerating re-employment. Further reforms, however, are needed to fight long-term unemployment, which remains a major problem of the German labor market. In addition to activation policies, Schneider called for further tax reforms, lower unemployment insurance contributions, less stringent layoff protection, an economically motivated immigration policy, and more efforts to provide an education that provides future workers with the necessary qualifications to offset the impending shortage of high-skilled workers caused by demographic change. "Full employment in Germany is not a utopia," Schneider said.

[Download full text - in German]

left to right: E. Lazear, K. Scharioth, A. Constant, K. F. Zimmermann

Through its extensive network of Research Fellows, IZA has cultivated strong ties with researchers and cooperating institutions in the United States. From now on, IZA will be able to further advance this cooperation through an attractive new infrastructure: DIW DC has just set up operations as an independent and non-profit research institution in the nation's capital. The primary objective of DIW DC is to provide U.S. policymakers with economic expertise on Germany and Europe and to promote the transatlantic dialog on issues of economic policy. In addition, the Washington-based institute will pave the way for future collaborations between think tanks and universities.

Cooperating closely with both DIW Berlin and IZA, the new institution is also well-connected with Georgetown University. It is bound to become an ideal platform for IZA Research Fellows to organize research and publication projects in Washington. During the official inauguration of DIW DC on October 23, 2007, IZA Director Klaus F. Zimmermann, German Ambassador Klaus Scharioth, and Chairman of the U.S. Council of Economic Advisers Edward Lazear, who received the 2004 IZA Prize in Labor Economics, underscored the importance of an international focus on scientifically founded policy advice.

DIW DC is headed by Executive Director Amelie Constant, who is Visiting Professor of Economics at Georgetown University and will continue to serve as IZA Deputy Program Director for Migration.

More information:
- DIW DC homepage (under construction)
- DIW DC press release
- Report in "The Week in Germany"

J. Agell †

We are saddened that IZA Research Fellow Jonas Agell has passed away at the age of 50 after a serious illness. He was an extraordinary scholar and a role model to many. Jonas Agell graduated from Uppsala University in 1986, where he became professor at the economics department in 1992. In 2001, he joined the department of economics at Stockholm University. Professor Agell worked in the fields of labor economics, public economics and macroeconomics. He published extensively in high-ranking journals such as the American Economic Review, Journal of Public Economics, and Journal of Monetary Economics. In 2004, he joined the IZA network of Research Fellows and was appointed as editor of the Scandinavian Journal of Economics. He was also an active voice in the Swedish policy debate. Those who knew him will always remember his warm personality and outstanding professional qualities.

The Federal Ministry of the Interior (BMI) has installed a "Census Commission" that will advise the German government and statistical offices on the concept and methodology of the 2011 census, which will be the first of its kind in Germany to be based on register data. Headed by IZA Research Fellow Gert G. Wagner (TU Berlin and DIW Berlin), the commission will work on an honorary basis until 2013. Its members include IZA Director of Labor Policy Hilmar Schneider and eight other renowned German experts from various relevant disciplines.

For more information see the BMI press release (in German).

With the publication of its 3000th paper, the highly successful and influential IZA Discussion Paper Series has reached another milestone. As of this year, an average of two new studies is made available online each day. Restricting authorship to IZA in-house researchers and members of the institute's international research fellow network guarantees the high academic standard of the series.

IZA DP No. 3000 is a study co-authored by IZA Research Fellow Anders Björklund (Stockholm University). The paper examines trends in the importance of family background for adult income in Sweden. The authors find a declining "brother correlation" in income, which indicates that family background is less important today in determining future income. Instead, education policies have been shown to be a key factor in equalizing life chances in Sweden.

Read the complete study:
Anders Björklund, Markus Jäntti, Matthew J. Lindquist: Family Background and Income during the Rise of the Welfare State: Brother Correlations in Income for Swedish Men Born 1932–1968 [Download PDF]

According to a recent survey conducted for the German business daily Handelsblatt, IZA's in-house researchers are the most productive among Germany's nine major research institutes in terms of publications output in 2006. Compared to the period 2000-2006, IZA more than doubled its output to 1.99 pages (quality-weighted) per employee. This is well ahead of next-ranked WZB (1.28 pages) and over four times the average of 0.45 pages for the staff of all other seven institutes.

Despite its comparatively small size and its unique specialization in labor economics, IZA now holds a remarkable "market share" of 12.8% in Germany. These figures do not even include the highly productive network of IZA research fellows, who accounted for 63.0% of the output produced by all fellows of the nine German institutes in 2006. With staff researchers and fellows combined, IZA's market share of 32.0% percent is the highest of all institutes – followed by Ifo (28.3%).

[complete study in German]

The Second IZA/World Bank Conference on Employment and Development took place June 8-9, 2007 in Bonn. More than 200 experts from around the globe discussed how international development assistance can help improve the labor market structures in low-income countries. IZA and the World Bank have established a joint research program area on this topic.

The issue has an immediate relevance for today's policy debate as there is a growing consensus that current development initiatives need to be reconsidered and fundamentally improved. Higher national expenditures on development aid will not suffice. "Policymakers will need to focus increasingly on the labor markets in developing and emerging economies. This area is key to a more effective development cooperation," said IZA Director Klaus F. Zimmermann.

[Conference Program] | [Joint Declaration by World Bank and IZA]

Becker, Kim, Zimmermann

On June 14, IZA Director Klaus F. Zimmermann presented the 2007 Kuznets Prize to Jinyoung Kim (Associate Professor of Economics, Korea University Seoul) for his article in the Journal of Population Economics 18, 2005 on "Sex selection and fertility in a dynamic model of conception and abortion." The Journal of Population Economics is an international quarterly that publishes original theoretical and applied research and survey articles on topics dealing with broadly defined relationships between economic and demographic problems. Zimmermann serves as Editor-in-Chief of the journal, which is headquartered at IZA. The Kuznets Prize – named after the late pioneer in population economics and former Harvard professor Simon Kuznets – honors the best article published in the Journal of Population Economics during a three-year period. The fourth prize was awarded for the period 2004-2006. Nobel Prize Laureate Gary S. Becker (University of Chicago), who supervised Kim’s dissertation in 1994, attended the award ceremony that took place during the Annual Conference of the European Society for Population Economics (ESPE) in Chicago.

[more about the Kuznets Prize]

In Germany, wage inequality has been rising since the late 1970s. Throughout the 1980s, all workers experienced a real wage growth, but wages grew substantially faster for workers at the top of the wage distribution. In contrast, in the 1990s and early 2000s, i.e. after reunification, real wages continued to rise at the top, but started to decline for low-income groups. These are the findings of a recent study conducted by IZA Research Fellows Christian Dustmann and Uta Schönberg in cooperation with Johannes Ludsteck from the IAB, funded by the Anglo-German Foundation and the Deutsche Forschungsgemeinschaft. The study suggests that the rise in inequality among high wage earners is primarily due to technological change, whereas the real wage losses of low wage earners are partly due to a decline in union coverage. These findings are relevant in light of the current debate on the minimum wage [read more].

Full text of the study: Christian Dustmann/Johannes Ludsteck/Uta Schönberg: Revisiting the German Wage Structure. IZA Discussion Paper No. 2685 [PDF]

Following an invitation by the Cyprus Economic Society, the University of Cyprus and the Bank of Cyprus, Prof. Dr. Klaus F. Zimmermann, IZA Director and President of the German Institute for Economic Research (DIW Berlin), presented a national public lecture, the 2007 Cyprus Economic Society Annual Lecture in Economics, with the topic "Migrant Ethnic Identity and Its Impact on Economic Behavior" (see IZA DP No. 3056) at the Bank of Cyprus, Nicosia on April 13, 2007.

During the LoWER (European Low-Wage Employment Research Network) Workshop on Migration, which took place April 20-21, 2007 in the Centre for Economic Performance (CEP) of the London School of Economics, Zimmermann presented the keynote speech entitled "Migration Potential and Its Labour Market Impact After EU Enlargement: A Review".

On May 16, 2007, he was invited by the Anglo German Foundation to present a lecture entitled "Germany's economic priorities during the EU and G8 presidencies: Challenges and Perspectives" as part of the lecture series "Fit for the Future: Policies for Sustainable Growth in Europe".

A recently published cross-country study on the compatibility of family and work reveals Germany's shortcomings with respect to female labor market participation. Given the need for more high-skilled workers and the socially desired equality of opportunity for women, as well as the declining birth rate, a family-friendly policy is an essential investment in the future. Among the key fields of action are reforms of the tax, welfare and transfer systems, the improvement of institutional childcare facilities, and the establishment of a market for family-related services. The book published in German language by the Bertelsmann Foundation is the result of joint research activities by IZA (represented by Werner Eichhorst and Lutz Kaiser), the Bertelsmann Foundation and the Berlin-based research institute ExAKT. Dealing with the interplay between economic and institutional processes and the public and private sectors, the study underscores the urgent need for reforms in Germany.

Werner Eichhorst/Lutz C. Kaiser/Eric Thode/Verena Tobsch:
Vereinbarkeit von Familie und Beruf im internationalen Vergleich - Zwischen Paradigma und Praxis
Verlag BertelsmannStiftung, Gütersloh 2007; 130 pages, €20;
ISBN 978-3-89204-931-9 | [Summary in German]

Authored by IZA Program Director Barry R. Chiswick (University of Illinois at Chicago) and IZA Research Fellow Paul W. Miller (University of Western Australia), a new volume comprises important essays on "The Economics of Language" exploring the determinants of dominant language proficiency among immigrants and other linguistic minorities and the consequences of this proficiency for the labor market. Using empirical material from different countries, the authors, both internationally renowned experts in the field, develop a range of models of the determinants of dominant language proficiency and use econometric techniques to test them and estimate the magnitude of the effects. The countries being investigated are the US, Canada, Israel, Australia and Bolivia, to ensure that various languages and countries are included, so that the measured effects can be regarded as universal.

The book consists of six parts. In "The Determinants of Language Proficiency", the authors describe three important variables explaining language proficiency: exposure to the destination language, efficiency in the acquisition of the language, and economic incentives to acquire the language. "The Effects of Language Proficiency on Labor Market Outcomes" suggests that there are large effects of language proficiency (fluency, literacy and numeracy) on both earnings and employment. Further essays investigate "The Interaction of Language and Earnings Among Immigrants" and "Language and Earnings Among the Native Born". Focusing on linguistic enclaves established by immigrants, another part of the book explains the effects of "Language, Networks and Enclaves", while "Linguistic Distance" connects the distance between the mother language and the destination language of an immigrant to his linguistic accomplishments. The overall results suggest that language is an important factor of labor economics. Specialists in labor economics, linguistics as well as a number of researchers in other disciplines can use this volume as an excellent resource.

Further information will be available at www.routledge.com soon.

Freeman, Bertola and Zimmermann cutting the "birthday cake"

In April 2007, the IZA European Summer School in Labor Economics took place for the 10th time – an occasion for a ceremony that added a festive atmosphere to this year’s event. There is indeed good reason for celebration: The IZA Summer School has established an outstanding reputation as one of the most influential forums for interaction between renowned and up-and-coming junior labor economists. Over the years, a total of 340 Ph.D. students – with females making up a remarkable share of 44% – have undergone the tough selection process to participate in the Summer School, for which 21 top representatives of the state-of-the-art in labor research have served as lecturers. Participants representing over 40 nationalities and universities located in over 20 countries made for a colorful and productive blend. The Alumni of the IZA Summer School now succeed in careers in academia and international organizations, with over two thirds of those who are no longer students currently working as professors or researchers at universities and other research centers.

For the past four years, the Summer School has been funded by the European Union under the "Sixth Framework Programme, Marie Curie Conferences and Training Courses." In addition, four major scientific associations in Europe support the event through an Advisory Committee: the Centre for Economic Policy Research (CEPR), the European Economic Association (EEA), the European Association of Labor Economists (EALE), and the European Society for Population Economics (ESPE).

The 10th IZA European Summer School in Labor Economics took place on April 23-29, 2007, as always at the conference center of Deutsche Post World Net at the Ammersee Lake (near Munich) in Bavaria, Germany. This year, 34 students from nineteen different nationalities attended the event, which featured lectures by Giuseppe Bertola (University of Turin) and Richard B. Freeman (Harvard University and London School of Economics). While Bertola's subject was "Labor Markets and Economic Integration: Imperfections, Regulations, and Reform," Freeman taught on "Schizophrenic Economics," contrasting the traditional concept of the homo oeconomicus with recent research on behavioral economics. Counseled by the communications expert Rachel Hardy (Warwick University) on "How to Prepare and Present Your Poster," the students presented their work either giving a talk or hosting a poster session.

IZA Director Klaus F. Zimmermann, who attended the event along with advisory committee member Peter Jensen (Aarhus School of Business) representing ESPE, underscored IZA's continued commitment to promoting the future elite in labor economics: "From the very beginning of IZA, the Summer School has been an integral part of our efforts to reap the synergies of fruitful interaction between junior researchers and well-established labor economists. This success story is set to continue."

D. Papademetriou, H. Bonin, K. F. Zimmermann

German and European immigration policies have only recently begun to cope with the inevitable: growing labor demand in the face of high unemployment and a shrinking labor force due to demographic change. Despite the implementation of Germany's first immigration act and several European initiatives towards legal harmonization at the EU level, an actively controlling immigration policy, which would be needed to master the challenges ahead, is not yet in sight. Against this background, a new IZA book draws conclusions from the German history of immigration policy. It analyzes the country's future demand for immigration and develops an economic model for the effective selection and integration of labor migrants that could provide the foundation for a joint European immigration strategy.

Following an invitation by the President of the Migration Policy Institute (MPI), Demetrios Papademetriou, IZA Director Klaus F. Zimmermann and IZA Senior Research Associate Holger Bonin presented the book in Washington D.C. on March 22, 2007 and discussed its central findings, particularly in regard to their implications for U.S. immigration policy, with an audience of invited guests. In view of growing international competition for human capital, Zimmermann proposed the establishment of a joint U.S.-European market for high-skilled migrants in order to prevent a fierce rivalry for the best and the brightest.

Klaus F. Zimmermann, Holger Bonin, René Fahr, Holger Hinte:
Immigration Policy and the Labor Market: The German Experience and Lessons for Europe
Springer: Berlin/Heidelberg, 2007; ISBN 978-3-540-69381-0
[Table of Contents]

What directions should workforce policy in the U.S. take over the next few decades in light of major labor market developments that will likely occur in this period – such as the retirements of "baby boomers" and continuing globalization? A new volume edited by IZA Research Fellow Harry J. Holzer (Georgetown University and Urban Institute) (Georgetown University and Urban Institute) and Demetra S. Nightingale (Johns Hopkins University and Urban Institute) presents fresh thoughts on this topic. Essays by Richard Freeman, Burt Barnow and Demetra Nightingale review the relevant labor market and policy contexts that will likely exist over the next few decades; those by Robert Lerman and Sarah Turner review career education and higher education for youth; while Paul Osterman, Dan Bloom and David Butler discuss training for less-skilled adults. Essays also appear on immigration and retirement policy, written by George Borjas and Alicia Munnell; and on insurance for workers and family workplace issues, by Gary Burtless and Jane Waldfogel. Together, these essays provide a set of policy discussions that are firmly grounded in strong research and that address the most critical workforce issues over the coming years.

Harry J. Holzer, Demetra Smith Nightingale (eds.),
Reshaping the American Workforce in a Changing Economy
Urban Institute Press, 2007; ISBN 0-87766-735-7

Concept not feasible to promote the low-wage sector

An IZA report for the Federal Ministry of Finance finds that the in-work benefit concept proposed by Peter Bofinger (member of the German Council of Economic Experts) would create very few jobs. The study, authored by Holger Bonin and Hilmar Schneider, also warns that the detailed regulations would be difficult to grasp for the average citizen and that the administration of financial benefits for low-wage earners would involve enormous amounts of red tape.

"In-work benefits are an inadequate approach that policymakers should no longer pursue. A workfare scheme based on the principle of reciprocity - work effort in return for welfare benefits - is by far the superior concept," said Hilmar Schneider, IZA Director of Labor Policy.

Read also (in German):
- IZA Press Statement
- IZA Report (full text)
- Short Summary

On behalf of the Federal Ministry of Economics (BMWi), IZA has analyzed the fiscal and employment effects of a recent BMWi model to support the low-wage sector. The model combines in-work benefits with a workfare approach, requiring that welfare recipients who are fit to work spend 39 hours per week either in a publicly provided job or in training programs. The IZA study presented in March 2007 arrives at a positive assessment: Bringing up to 1.4 million people back into employment, the BMWi approach could at the same time reduce public spending by 25 million euros per year. The model is therefore superior to other currently discussed in-work benefit models.

Read also (in German):
- IZA Press Statement
- IZA Research Report No. 12 (full text of the study)

According to recent IZA calculations, the Solidarisches Bürgergeld ("solidaristic minimum income") model proposed by Dieter Althaus, head of the federal state of Thuringia, cannot be financed. The model would abolish the current unemployment insurance and pension schemes in favor of a guaranteed minimum income for each citizen (depending on other income earned, the monthly allowance would be 800 euros). An earnings disregard clause is supposed to encourage low-wage employment. However, the potential employment effect of about 600,000 additional jobs would be contrasted with additional fiscal costs of at least 220 billion euros per year. The Althaus model is thus far too expensive to seriously compete with the BMWi model or the workfare model proposed by IZA.

Read also (in German):
- IZA Press Statement
- IZA Calculations (full text)

A new book, the first in the IZA Prize Series published by Oxford University Press, analyzes the work of one of the most important economists of the 20th century: Jacob Mincer, the inaugural recipient of the IZA Prize in Labor Economics. Since 2002 IZA has awarded this prize for outstanding contributions to policy-relevant labor market research and methodological progress in this sub-discipline of economic science. All prize-winners contribute a volume to the IZA Prize Series, which has been established to provide an overview of the laureates’ most significant findings.

This first volume of the IZA Prize Book Series is unique in many respects. It is the first comprehensive account of the lifetime achievement of the great pioneer in labor economics, Jacob Mincer, who won the first IZA Prize in 2002. According to the award statement by the IZA Prize Committee, "Jacob Mincer is the founding father of modern empirical labor economics. His efforts in developing the scientific instruments and methods used by today's economists to analyze the problems and prospects of the working world are almost unparalleled." The complete text of the document is contained in this book.

The new volume provides a – long overdue – account of Mincer's influential career. It is authored by the Portuguese economist and IZA Research Fellow Pedro Teixeira, a veritable expert on Mincer and his work. Remarkably, Jacob Mincer was always available to the author for many enlightening discussions that made this exceptional volume possible. Depicting Mincer's varied research activities against the background of an eventful life, this book is a necessity for everyone interested in the development of what has become the standard toolset of today's labor economists.

Pedro N. Teixeira:
Jacob Mincer: The Founding Father of Modern Labor Economics
Oxford University Press, 2007; ISBN 978-3-540-69381-0 [view table of contents]

A recent IZA report for the Federal Ministry of Education and Research describes the development of labor supply and demand by qualification level in western and eastern Germany until 2020. The predicted need to expand the labor force in western Germany is initially based on a continuation of the long-term growth trend and accounts for the dampening effects of demographic change. For eastern Germany, moderate economic recovery is assumed. Then the overall need for the expansion of labor is broken down to specific industries, occupations and qualification levels on the basis of recent trends.

The prediction of labor supply by qualification level includes replacement supply as well as new supply according to a transition rate model of the education system in combination with the official population forecast. Projected supply comprises different scenarios for the development of labor force participation and the education system. The results show a rising demand for academics, which will be approximately met by the predicted increase in high-skilled labor supply. The demand for workers with vocational training is expected to stagnate. But since labor supply on this qualification level will shrink substantially, a shortage of qualified labor may evolve over the medium term. Low-skilled workers without vocational training will be negatively affected by future trends. While the demand for this group is falling, their share of the labor force will barely decrease.

[Download the complete report] (PDF file, 842 kB, German language only)

Based on preliminary findings from the scientific evaluation of the Hartz I-III labor market reforms in Germany, a recent IZA study concludes that less than one third of public expenditures for active labor market policy in 2006 had measurable positive effects. Among 60 funded programs, only four have been found to be effective (although the long-term impact cannot yet be assessed).

Against this background, IZA calls for a clear focus on labor market policy schemes with proven positive effects (wage subsidies, training, start-up grants and placement vouchers). The complete study by IZA Director Klaus F. Zimmermann and IZA Senior Research Associate Werner Eichhorst is available as IZA Discussion Paper No. 2605 in German language (see also the IZA press statement).

G. van den Berg

As of January 2007, IZA Program Director Gerard J. van den Berg has been appointed as Top Professor at the Free University of Amsterdam. Deemed pivotal for the university, Top Professors receive special means to stimulate their research activities. Currently, the Free University of Amsterdam has three Top Professors. Van den Berg's appointment is well-tuned to his role as IZA Program Director for the evaluation of labor market policies and will strengthen further research initiatives at IZA as well as facilitate future collaboration between the institute and van den Berg's research team at the university.

T. Cheng and K. F. Zimmermann (right)

In a festive ceremony on December 20, 2006 in Beijing, Richard B. Freeman (Harvard University, NBER and IZA) and IZA Director Klaus F. Zimmermann have been appointed Honorary Professors of Renmin University of China in recognition of their outstanding contributions to labor economics. Both economists were awarded this high honor from the hands of Tianquan Cheng, Chairman of the University Council of Renmin University, in front of a larger number of distinguished Chinese labor economists, government officials, and many research students. The laudations were given by Xiangquan Zeng, Dean of the School of Labor Relations & Human Resources of Renmin University and Director of its China Institute for Employment Research (CIER).

Among the key components of the "Hartz" reform package to modernize the German labor market is the reorganization of measures to promote further vocational training (FbW) and to reintegrate workers who were laid off due to corporate restructuring. A joint study by IZA, DIW Berlin and infas Bonn for the Federal Ministry of Labor and Social Affairs provides a scientific evaluation of these reforms, which have been implemented since 2003.

Published in January 2007, the report finds positive results for the reorganization of further vocational training as well as the reform of transfer schemes for the unemployed. Reentry of FbW participants into employment has been accelerated, and the negative effect of transfer payments on reintegration has been curbed.

"The results show that the federal government has made important first steps to improve the labor market situation in Germany," commented Hilmar Schneider, IZA Director of Labor Policy. "Further steps must follow now in order to seize the momentum of the recent economic recovery."

The following documents are available for download (in German language only):
- IZA Press Statement (PDF, 2 pages, 47 kB)
- Final Report - Short Version (PDF, 18 pages, 237 kB)
- Final Report (PDF, 238 pages, 1,7 MB)
- Final Report - Appendix A-C (PDF, 192 pages, 875 kB)
- Final Report - Appendix D-G1 (PDF, 366 pages, 8,6 MB)
- Final Report - Appendix G2-N (PDF, 476 pages, 11,2 MB)

K. F. Zimmermann, E. Moretti

On January 6, 2007, IZA Director Klaus F. Zimmermann presented the first IZA Young Labor Economist Award to Enrico Moretti (University of California, Berkeley) during an IZA reception held at the Annual Meetings of the Allied Social Science Associations (ASSA) in Chicago. This newly established prize is awarded for an outstanding paper published by young labor economists under the age of 40. The selection committee – consisting of Zimmermann, IZA Research Director Armin Falk and six IZA Program Directors – chose Moretti's paper "Estimating the Social Return to Higher Education: Evidence from Longitudinal and Repeated Cross-Sectional Data" (Journal of Econometrics, 2004) from a large number of nominations submitted by IZA Research Fellows.

During the award ceremony, Zimmermann stated the selection committee was impressed by the "scientific originality, methodological rigor and policy relevance" of the paper, which provided evidence that the social return to education may in fact exceed the private return. In his acceptance speech, Moretti declared he felt extremely honored to receive this inaugural award from an "institute that has in just a few years established itself at the forefront of international research in labor economics."

A. Falk

IZA Research Director Armin Falk has been elected as a Council Member of the European Economic Association (EEA) for the five-year period starting January 1, 2007. EEA Secretary Ian Walker (University of Warwick and IZA) congratulated Falk on the vote result and thanked him for his continuous support of the EEA in its work.

Also in January 2007, Falk received the John T. Dunlop Scholar Award from the Labor and Employment Relations Association (LERA) for his work on international labor issues. According to Morris M. Kleiner (University of Minnesota), Chair of the LERA Awards Committee, the committee members were "most impressed with his research on experimental economics dealing with labor issues." Kleiner also lauded Falk's role in establishing IZA as the "best research center for studying labor issues in Europe."

R. Faini †

The community of IZA Research Fellows lost an exceptional scholar when Riccardo Faini died suddenly on January 20, 2007 at the age of 55. Among economists he was well known for his fundamental contribution to the theory underlying the "new economic geography" (Economic Journal, 1984) and his influential work in the economics of migration, finance and development, trade and development. He was also directly involved in economic policy, first at the World Bank, then serving as Executive Director for Italy at the International Monetary Fund, and in the Italian Treasury over the past several months. Faini was an IZA Research Fellow since November 2001 and collaborated with IZA mainly on migration topics. In 1999 he co-edited a volume on "Migration - The Controversies and the Evidence" with IZA Director Klaus F. Zimmermann. Riccardo Faini was a great colleague and person. He will be sorely missed.