IZA - Electronic Archive

How immigrants and their descendants fare in the host society and in particular in the labor market is a very important question. While differences among ethnicities have been found to be marked and persistent within many host countries, and while the labor market consequences of diversity have been recognized, they have not been sufficiently examined. Edited by IZA migration experts Amelie F. Constant, Konstantinos Tatsiramos and Klaus F. Zimmermann, this volume contains fresh knowledge to help better understand the complex relationship between ethnic or minority groups, the role of ethnic identity and their disparate economic performance. Focusing on topics such as citizenship, interethnic marriages, and immigrant entrepreneurship, the book brings the role of ethnic identity in the forefront of scientific and political discussion and provides a link among these themes, anticipating new trends and directions in this area.

The Research in Labor Economics Series presents important new research in labor economics related particularly to worker well-being covering themes such as work and worker welfare, earnings distribution, skills, training, public policy, discrimination and migration. All academics and researchers in the field of labor economics are invited to submit their work for consideration in the series. Proposals for special issues (e.g. from workshops or sessions of international conferences) and symposia are also considered.

For general information on RLE submission guidelines and an online submission form see www.iza.org/rle

Katherine Terrell †

It is with the most profound sadness that we learned of the unexpected passing of IZA Research Fellow Katherine Terrell on December 29, 2009. She was an extraordinary scholar and a role model to many.

Katherine Terrell was a Professor of Business Economics and Public Policy at the Stephen M. Ross School of Business, and a Professor of Public Policy Analysis at the Gerald R. Ford School of Public Policy at the University of Michigan. She published widely in the areas of economic development and labor economics. Her research evaluated the impact of government policies and the effect of globalization on wages, employment, income inequality and firm performance in emerging market economies. She also served as a consultant to various international organizations such as the World Bank, the OECD and the EBRD. Kathy was an IZA Research Fellow for over ten years and has made immense contributions to the network. She published 19 IZA Discussion Papers and participated in numerous IZA workshops and conferences.

Those who knew her will always remember her warm personality and outstanding professional qualities. "We are completely shocked by this horrible news. Our thoughts are with her family," said IZA Director Klaus F. Zimmermann.

Twenty years after the Berlin Wall came down, IZA Director Klaus F. Zimmermann analyzes the economic development of east Germany in an op-ed piece for the Financial Times: "The most interesting – and overlooked – insight of east Germany's transformation is that its difficulty in catching up with the west ultimately proves to be not so much a reflection of its communist past than of its rural, low-density population structure. Simply put, economic value increases with population density. The more companies swap ideas and the closer they co-operate, the better it is for productivity – and incomes. [...] This analysis suggests the real distinction is not so much between 'east' and 'west' as between low-density and high-density regions, no matter where they are in Germany."

In order to move forward, east Germany must develop a more sharply defined regional comparative advantage, argued Zimmermann. The American South could serve as an example of an under-achieving region that has recently experienced boom times and has become a destination of choice for foreign companies: "If it can happen there, it can happen in the former East Germany, too."

Read the complete article: "Why east Germany is slow to change" (Financial Times, November 5, 2009)

Wage inequality among full-time workers in Germany has been rising since 1997. An analysis of 20 OECD countries shows that the gap between low and middle incomes in Germany is growing faster than in any other of the countries. While at the end of the 1990s low-wage earners achieved 64% of the income of middle-wage earners, their relative income declined to 53% in 2007. Wage inequality between these labor market segments in Germany has now reached the level of such countries as the United Kingdom. On the other hand, inequality at the upper tail of the wage distribution is much lower and has not grown substantially over the past decade. It is similar to levels found in the Netherlands, Denmark or Sweden. At the same time, the rise of temporary and marginal work has created a growing social security gap. These are the key findings of a joint study by the Bertelsmann Foundation and IZA, which was published as IZA Research Report No. 22 and as part of the Bertelsmann Foundation's "Benchmarking Deutschland" series.

Werner Eichhorst, co-author of the study: "We used to have fewer, but mostly ‘good’ jobs in Germany. Now we have more employment, but also a greater variety of jobs."

See also the Bertelsmann Foundation press statement (in German)

In the first weeks of the new German government, the planned tax cuts are a hot topic of public debate. A new IZA study simulates the fiscal and distributional effects of the proposal by the Free Democrats (FDP) to implement an income tax rate schedule with three brackets and an unconditional basic income scheme (Bürgergeld).

The analysis shows that this comprehensive reform, which makes all income groups better off, would lead to substantial fiscal costs of an estimated 86 billion euros per year. At the same time, the employment effects are not unambiguously positive. From an economic perspective, therefore, the combination of a three-bracket tax schedule with an unconditional basic income is not advisable. Viewed separately, the tax reform proposal would yield positive employment effects and lower fiscal costs. However, a cost of 86,000 euros per full-time equivalent still seems to be unreasonably high. Moreover, the potential distributional effects in favor of higher incomes are politically questionable as well.

Overall, the assessment of the tax reform proposal as such is negative, regardless of whether the plans would be implemented as currently proposed, or in a changed form. This finding does not absolve Germany's policymakers from lowering the total tax and contribution ratio, which is still extraordinarily high when compared to other countries. However, the planned reforms fail to tackle a key problem of the German labor market, which is that the current tax-benefit system does not set the right incentives to work. This problem could be solved effectively by implementing the workfare principle of reciprocity.

Read the complete study (in German): IZA Standpunkte Nr. 21

A new book by IZA Director Klaus F. Zimmermann and Dorothea Schäfer (DIW Berlin) provides insights and assessments of the current financial crisis. The authors analyze the misguided trends in the international banking sector and propose ways for governments and taxpayers to avoid being held hostage by the global financial system. To prevent the barely contained financial wildfire from reigniting again, the authors recommend a fundamental reform of the German Landesbanken and develop an agenda for a crisis-proof new financial market architecture.

Klaus F. Zimmermann, Dorothea Schäfer:
Finanzmärkte nach dem Flächenbrand - Warum es dazu kam und was wir daraus lernen müssen
Wiesbaden: Gabler Verlag 2010. ISBN 978-3-8349-2032-4

from left: Bruno Coquet, Thérèse de Liedekerke Werner Eichhorst, Andrew Watt

After the successful first edition in fall 2008, the second IZA Employment Seminar was held in Brussels on November 12 and 13, 2009, to stimulate the discussion between current labor market research and policy making both at the national and the EU level. This year's seminar, organized by IZA Director Klaus F. Zimmermann and IZA Deputy Director of Labor Policy Werner Eichhorst, focused on understanding and explaining the cross-country divergence in labor market performance and policy choices in response to the global economic crisis.

During the conference, both comparative studies and in-depth analyses of selected European countries were discussed, drawing particular attention to the unequal distribution of risks across different groups of the working-age population. Against this background, the seminar also addressed the issue of how to design viable structural reform policies going beyond the short-term action observed in most countries. The second IZA Employment Seminar brought together about 50 academic and policy-oriented participants from EU Member States, the European Commission, the ECB and other international organizations such as the OECD and the ILO, among them a number of international IZA Policy Fellows.

[view complete program]

"IZA on Tour" in Warsaw, Nov. 10

Five years after EU enlargement, a new IZA book analyzes the consequences of east-west labor migration for the old and new EU member states. In sum, the positive effects clearly dominate. Countries that have allowed free mobility at an early stage, such as Sweden, Ireland and the United Kingdom, have benefited the most, whereas Germany is among the losers as a result of its closed-door policy. As of January 2009, Germany has tried to catch up in the competition for qualified workers by enacting the Arbeitsmigrationssteuerungsgesetz (law to control labor migration). "That's not enough," said IZA Director Klaus F. Zimmermann, who edited the new volume together with Martin Kahanec, Deputy Director of Research at IZA. "We need to send out a strong signal that qualified foreign workers, especially university graduates, are highly welcome as immigrants in Germany. Otherwise Germany will fall even further behind in the international competition for scarce human capital." A number of renowned experts have contributed country studies that cover the situation in the "old" EU member states as well the role of migration and brain drain in the accession states.

IZA on Tour:
During a book tour with stops in various European capitals and Washington, the editors presented the findings contained in the volume to a large audience of migration experts and policy makers [read more].

Martin Kahanec/Klaus F. Zimmermann (eds.), EU Labor Markets After Post-Enlargement Migration, Springer: Berlin et al. 2009, 344 pages. ISBN 978-3-642-02241-8 [order info]

(click to enlarge)

The German labor market continues to be remarkably resistant to the economic crisis. As predicted by IZA's Google indicator, the labor market situation did not worsen in September.

In fact, according to official statistics, the unemployment even fell rather than rising slightly as had been expected, which confirms the recovery trend the indicator has shown in the past months. This underestimation of the recovery in September is partly due to changes in the way the official statistics are collected, which are hard to capture mathematically.

The forecasting model therefore continues to defy the many predictions of an imminent and dramatic increase in unemployment. The stability of the labor market is largely due to the expansion of short-time work and earlier labor market reforms. A notable increase in unemployment should not be expected before the beginning of next year.

Based on Google search activity in September, the Google indicator predicted a small rise of unemployment in October. The same is true for a prognosis model relying on the DAX. Official statistics even recorded a slight decrease, which shows that the predicted stability still holds.

[more on the Google indicator]

L. Katseli

After the victory of her party in the Greek parliamentary elections, IZA Fellow Louka T. Katseli was appointed as head of a newly-created "super-ministry" of the economy, competitiveness and shipping. Professor Katseli was previously Director of the OECD Development Centre (2003-2007) and has held several academic and non-academic positions in Greece and abroad. She has widely published in international peer-reviewed journals. Her fields of specialization include international trade and finance, economic development and macroeconomics. Her recent work has focused on such issues as legal and illegal labor migration, economic reforms, public policy effectiveness and institution-building in developing countries, as well as the political economy of the European integration.

Richard A. Easterlin and Klaus F. Zimmermann

The 2009 IZA Prize in Labor Economics was awarded to U.S. economist Richard A. Easterlin (University of Southern California) for his outstanding research on the analysis of subjective well-being and on the relationship between demographic developments and economic outcomes [more information].

The Award Ceremony took place during a series of events at the Renaissance Mayflower Hotel in Washington, D.C.:

• October 22:
  Policy Forum: "The Global Economic Crisis and the Labor Markets"
  Award Cermemony and Banquet Dinner
  
• October 23-24:
  IZA Prize Conference on Frontiers in Labor Economics: "The Economics of Well-Being and Happiness"
  [complete program]

See the IZA press statement.

(text only available in German)

Die vom IZA anhand des Google-Indikators prognostizierte Krisenresistenz des deutschen Arbeitsmarkts ist durch die Bekanntgabe der Arbeitsmarktzahlen für den Monat August im Grundsatz bestätigt worden. Zwar ist die Arbeitslosigkeit nicht zurückgegangen, ihr Anstieg fiel jedoch mit nur 9.000 zusätzlichen Arbeitslosen sehr moderat aus. Für den Monat September bekräftigt das IZA auf Basis der neuesten Daten seine Vorhersage einer eher ruhigen Arbeitsmarktentwicklung. Zwar ist – saisonunüblich – auch für den kommenden Monat von einem weiteren leichten Anstieg der Arbeitslosenquote auszugehen. Das vom IZA verwendete Google-Prognosemodell widerspricht dennoch unverändert anderen, lange geäußerten Einschätzungen, denen zufolge ein drastischer Anstieg der Arbeitslosigkeit bis in eine Größenordnung von vier Millionen kurz bevorstehe. "Der Arbeitsmarkt trotzt bislang in bemerkenswerter Weise den Folgen der Wirtschaftskrise. Das ist auch ein Verdienst der Arbeitsmarktpolitik der großen Koalition", so IZA-Direktor Klaus F. Zimmermann. "Wenn sich die wirtschaftliche Erholung fortsetzt und die Politik den Verlockungen weiterer fragwürdiger Konjunkturprogramme widersteht, dürfte der Arbeitsmarkt wohl glimpflich davon kommen. Rückschläge sind aber weiterhin möglich."

Lesen Sie dazu auch die Pressemitteilung des IZA vom 1. September 2009 (mit Literaturhinweisen).

Das IZA/Google-Arbeitslosigkeitsbarometer verwendet Google-Daten über die Internetsuchaktivität zu arbeitsmarktrelevanten Suchbegriffen und speist diese in ein ökonometrisches Modell ein, das verschiedene Prognosevarianten beinhaltet. Vorrangiges Ziel der Arbeiten an diesem alternativen Indikator ist es, der Politik ein Instrument an die Hand zu geben, das als Frühwarnsystem schneller als andere Indikatoren zuverlässigen Aufschluss über Trends der Arbeitsmarktentwicklung gibt.

click to enlarge

Based on a new model that uses recent data on Google search words to predict short-term unemployment trends, IZA forecasts a slight decrease in German unemployment for the months of August and September. According to this indicator, the crisis will not lead to substantial increases in unemployment anytime soon. "We expect that unemployment trends will take a summer break. There are also no signs of a dramatic increase this fall," said IZA Director Klaus F. Zimmermann. See also the IZA press statement (August 11, in German).

A recent article published in the IZA Standpunkte series describes the methodology of the Google indicator, its future potential and the most recent predictions:
Nikos Askitas/Klaus F. Zimmermann, Googlemetrie und Arbeitsmarkt in der Wirtschaftskrise. IZA Standpunkte No. 17, August 2009.

[more information on the topic]

In a recent issue of "Der Spiegel" magazine, IZA Direktor Klaus F. Zimmermann comments extensively on the economic effects of the Abwrackprämie (simimlar to the U.S. "cash for clunkers" program), the future of the automotive industry, and the consequences of the global economic crisis.

Countering the arguments by Max Otte (University of Worms), who was in favor of the program, Zimmermann said: "The global automotive industry has had an overcapacity problem for years now. But the current debate on rescue programs ignores the question of the industry's long-term sustainability. It is all about the promise to keep as many jobs as possible, courtesy of the German tax-payer. What is worse, the program slows down the reduction of overcapacity and the development of new products. [...] Some may label it 'eco premium', but there is really nothing environmentally friendly about this program."

Rebecca Blank

IZA Research Fellow Rebecca Blank (Brookings Institution) has been confirmed by the US Senate as Under Secretary of State of the Department of Commerce. She is the second member of the IZA research network to serve in a high-ranking position of the Obama Administration after Alan Krueger (Princeton University) took over the post of an Assistant Secretary of State of the Treasury for Economic Policy some weeks ago. Rebecca M. Blank is the Henry Carter Adams Collegiate Professor of Public Policy, and Professor of Economics at Brookings Institution. She is also the co-director of the National Poverty Center at the Ford School, funded by HHS to promote poverty-related research. From 1997-1999, she was a Member of President Clinton's Council of Economic Advisers. Professor Blank's research has focused on the interaction between the macroeconomy, government anti-poverty programs, and the behavior and well-being of low-income families.

IZA Director Klaus F. Zimmermann welcomed Blank's appointment: "She is one of the leading experts in the field of anti-poverty programs and will certainly be able to advise the Obama Administration on how to react efficiently to the ongoing economic crisis without aggravating poverty."

E. Wasmer, F. Kramarz

IZA's Research Fellows Etienne Wasmer (Sciences Po) and Francis Kramarz (CREST-INSEE) have been appointed by the Prime Minister of France to serve in the French "Minimum Wage Committee". The committee is the French counterpart of the Low Pay Commission in the UK; its task is to provide recommendations for the French minimum wage sector. The committee acts independently from the government.

In view of the growing debate on minimum wages, IZA organizes a conference on "The Economics of the Minimum Wage" (Berlin, June 21-23, 2009).

In times of crisis, there is a particularly strong demand for early and reliable forecasts of economic and labor market trends. For lack of up-to-date primary data, and due to rapid structural changes, traditional forecasting techniques have reached their limits in terms of providing a complete description of reality. Substantial legislative interventions, such as Germany's expansion of short-time work, create additional problems for the established forecasting models.

A recent study by IZA Director Klaus F. Zimmermann and Nikos Askitas (Head of the IDSC of IZA) presents an innovative approach to short-term forecasts of unemployment using data on Google search words, which allows them to predict unemployment trends as early as one month before the official figures are released by the Federal Employment Agency. As the first practical applications of the model show, the predictions are remarkably accurate: The trend reversal of the past months was predicted fairly well. According to the model, unemployment figures in Germany will continue to drop in June.

"Although the internet is a vast source of instantly accessible data, which responds quickly to changes in economic and political conditions, it has been widely neglected by science. Using these data for unemployment forecasts is a promising approach, given that more than 86 percent of all job-seekers leave some kind of trace on the internet as they search for jobs online. Of course, our forecasting technique based on Google data cannot replace traditional models that analyze causal relationships. But it provides fast and reliable information that can serve as an early warning system for policymakers," said Zimmermann.

Read the complete text of the study (in German):
IZA Standpunkte Nr. 13: "Prognosen aus dem Internet: Weitere Erholung am Arbeitsmarkt erwartet"

The scientific foundations of this article were laid in a paper by the same authors published in Applied Economics Quarterly:
IZA Discussion Paper No. 4201: "Google Econometrics and Unemployment Forecasting" (contains a link to the published version)

Most of the recent job growth in Germany has occurred in the service sector. While about three million jobs were lost in manufacturing since the early 1990s, almost six million new service-sector jobs were created during the same period. This trend, however, has also caused an erosion of standard employment. As a recent IZA study shows, flexible and project-based employment is on the rise in the dynamic, low-regulated sectors of the service industry. At the same time, the wage gap has widened, partly because the dual apprenticeship system has not been adapted to changes in qualification requirements. In order to tap the full employment potential in the service sector, regulation should be kept to a minimum. Flexible forms of employment can be the key to job growth particularly in the face of the current crisis.

The study is downloadable as IZA Discussion Paper No. 4220.
Read also the IZA press statement (in German).

According to recent studies compiled by IZA, Germany is among the losers of EU eastern enlargement. A forthcoming book on the labor market effects of the new east-west migration analyzes the consequences for the old EU members as well as the accession countries. In sum, the positive effects clearly dominate. Western countries that have allowed free mobility at an early stage, such as Sweden, Ireland and the United Kingdom, have benefited the most. Since the beginning of 2009, Germany has tried to catch up in the competition for qualified workers by enacting the "Arbeitsmigrationssteuerungsgesetz" (law to control labor migration), which removes some of the barrier for high-skilled migrants.

"But as long as we still create the impression that we do not want free mobility, we should not be surprised that the best and brightest choose other countries over Germany," said IZA Director Klaus F. Zimmermann. "This is a short-sighted policy, particularly during the current crisis, because over the medium term the demand for skilled labor can only be met with immigration. And highly qualified workers will not appear over night. They move to countries that have built up a reputation as immigration countries. This is why Germany must send out a strong signal that qualified foreign workers, especially university graduates, are highly welcome as immigrants in Germany."

Martin Kahanec/Klaus F. Zimmermann (eds.), EU Labor Markets after Post-Enlargement Migration, Berlin et al. 2009, ISBN 978-3-642-02241-8.
[Download promotional leaflet]

More information in German language:
- IZA Standpunkte No. 14 (Ulf Rinne/Klaus F. Zimmermann, Fünf Jahre EU-Ostererweiterung: Schlechte Noten für deutsche Abschottungspolitik)
- IZA Press Statement (June 24, 2009)

A. Krueger

IZA Prize Laureate Alan Krueger (Princeton University) has been confirmed by the U.S. Senate as Assistant Secretary of the Treasury for Economic Policy. He will now be in a key position to shape the Obama administration's policy in response to the financial and economic crisis. Before taking up his new government post, Krueger was affiliated with IZA as a Research Fellow since 2000. In 2006 he was awarded the IZA Prize in Labor Economics together with David Card (University of California, Berkeley) for his outstanding contributions to policy-relevant empirical labor market research. IZA Director Klaus F. Zimmermann welcomed Krueger's appointment: "Alan is one of America's most brilliant economists. He is certainly an excellent choice for this challenging political post in a time of great crisis."

R. Easterlin

This year's IZA Prize in Labor Economics, endowed with 50,000 euros, will be awarded to U.S. economist Richard A. Easterlin (University of Southern California). The prestigious award recognizes Easterlin's outstanding research on the analysis of subjective well-being and on the relationship between demographic developments and economic outcomes. In both fields, his work laid the foundations for broadening the scope of traditional economic analysis and thus contributed to advancing our understanding of behavior in a wide variety of economic settings such as education, labor supply decisions and the economics of the family. The official IZA Prize Ceremony will take place in Washington D.C. on October 22, 2009.

See also:
IZA press statement | USC news page | NYT blog entry by Justin Wolfers | Homepage of Richard Easterlin

Application deadline: May 31, 2009

To expand its research program areas Evaluation of Labor Market Programs and Migration, IZA has openings for three positions as Research Associates starting in fall 2009 (or later).

Research Associates will join the core research staff in Bonn. The positions offer a competitive compensation package plus a travel budget. Successful candidates are expected to publish their research in top peer-reviewed journals and contribute to the intellectual environment of IZA. The ideal candidate is a recent Ph.D. (or close to completion) with excellent knowledge of econometrics and applied and policy-oriented labor issues.

The appointment is for up to 6 years, initially for 3 years, with the possibility of renewal for another 3 years. IZA provides a stimulating research environment with excellent facilities and the opportunity to interact with IZA's large Research Fellow network. From an active weekly seminar series to various large-scale conferences, IZA offers a wide range of scientific events attracting renowned international labor economists.

For more information about the application process, and to view recent placements of former IZA Research Associates, go to the Jobs at IZA page.

IZA Research Fellow Pedro N. Teixeira (University of Porto) won this year's "Best Monograph Competition" run by the European Society for the History of Economic Thought (ESHET). His prize-winning book on "Jacob Mincer - A Founding Father of Modern Labor Economics" analyzes the work of one of the most important labor economists of the 20th century, with a significant and lasting influence on contemporary labor economics. According to the award statement, "the book does a fine and balanced presentation of Mincer's work and its intellectual and institutional context that should be appealing for historians of economics and economists."

Jacob Mincer (1922-2006) received the IZA Prize in Labor Economics in 2002. Teixeira's book is the first volume in the IZA Prize Series published by Oxford University Press.

Pedro N. Teixeira: Jacob Mincer - A Founding Father of Modern Labor Economics. Oxford University Press: 2007. ISBN 978-0-19-921131-9.

J. Wolfers

The Brookings Institution has named IZA Research Fellow Justin Wolfers (University of Pennsylvania) as editor of the Brookings Papers on Economic Activity (BPEA). He will co-edit the flagship economic journal of the institution with David Romer (Berkeley and IMF). The new co-editors, whose first volume will appear in mid-2009, will also both become Brookings nonresident senior fellows.

Founded in 1970, the BPEA journal contains research papers presented at twice-yearly conferences organized at the Brookings Institution. The authors and discussants of the articles are distinguished economists from leading universities and institutions. Previous editors include Douglas W. Elmendorf, who became the director of the Congressional Budget Office, N. Gregory Mankiw, former chairman of the U.S. Council of Economic Advisers, and Lawrence H. Summers, former Treasury Secretary, who is now President Obama's director of the National Economic Council.

Justin Wolfers is associate professor in the Business and Public Policy Department at the Wharton School of the University of Pennsylvania. He has been an extraordinarily active IZA Research Fellow since 2004, having co-authored more than a dozen IZA Discussion Papers to date. In addition, he is an NBER faculty research fellow, a CEPR research affiliate, and a visiting scholar with the San Francisco Federal Reserve Bank. His current research fields include labor economics, macroeconomics, political economy, public economics, and behavioral economics. He was named one of the 13 top young economists to watch by the New York Times.

In order to meet the growing demand for scientifically founded policy advice, IZA has established a new "Policy Paper" series to complement the highly successful IZA Discussion Paper Series, which already contains more than 4,000 titles. Contributions to the new series are primarily non-technical in nature. They deal with the policy implications of current labor market issues and contain concise conclusions and recommendations. German-language contributions are published as "IZA Standpunkte" in a parallel series.

[List of IZA Policy Papers]

Members of the "Future Commission"

On April 20, 2009, the Commission on the Future of North-Rhine Westphalia, installed by state premier Jürgen Rüttgers, presented its final report including a wide range of policy recommendations. The report is based to a large extent on a paper prepared by the working group on economic and labor market policy, chaired by IZA Director Klaus F. Zimmermann. Other members of the working group include Bodo Hombach (WAZ Media Group), Friedrich Merz (MP, CDU) and Wolfgang Streeck (Max Planck Institute for the Study of Societies, Cologne). The paper recommends a stronger focus on education and training, and a systematic expansion of the region's potential in higher education and energy innovation. In addition, the improvement of family-related services is considered to be of strategic importance. The recommendations of the working group and the commission are particularly relevant in light of the current economic crisis.

"Many of our proposals are also valid for larger reform efforts on the federal level," explained Zimmermann. "Sustainable structural reforms and investment in education and training are better suited to fight this crisis than gigantic economic stimulus packages."

The study of the working group is downloadable in German as a contribution to the "IZA Standpunkte" series: [download PDF, 4MB]
The complete report of the "Future Commission" has been published on the NRW website.

G. G. Wagner

The "Petersberg Declaration" signed by seven renowned economists identifies the major reform challenges for labor and social policymakers in Germany. One of the proposals is to create a market for social services and to reduce the regulatory entry barriers. Responding to representatives of the churches who have harshly critized this approach, Gert G. Wagner (DIW Berlin), Chairman of the EKD Advisory Chamber of Social Order and signatory of the Petersberg Declaration, warned not to prohibit reform thoughts. His view was published by the Evangelical Press Service, the news agency of the Protestant churches in Germany (epd sozial No. 9, 27 February 2009).

Read the complete text (in German) at www.epd-sozial.de.

While international migration of people most probably contributes to the allocative efficiency of the world's economies, the induced changes in equality in the sending and receiving countries may be considerable. In the recently released Oxford Handbook of Economic Inequality, a chapter on "International Migration, Ethnicity and Economic Inequality" by Martin Kahanec and Klaus F. Zimmermann discusses these issues under the paradigm of skilled and unskilled immigration, suggesting that at least skilled immigration promotes economic equality in the host country under standard conditions. The context is empirically documented und theoretically explained in a core model. The consequential aspects of immigrant absorption, selection and ethnicity are carefully evaluated in the context. The chapter is based on a revised version of IZA DP No. 3450.

The Oxford Handbook of Economic Inequality (edited by Wiemer Salverda, Brian Nolan, and Timothy M. Smeeding) presents a new and challenging analysis of economic inequality, focusing primarily on economic inequality in highly developed countries. This comprehensive volume offers an overview of the latest, cutting-edge research on economic inequality. It contains a broad array of original research on topics ranging from gender to happiness, from poverty to top incomes, and from employers to the welfare state.

More information on the book is available on this promotional leaflet or from Oxford University Press.

Recent work in experimental economics has found that under-representation of women in higher-paying jobs may be due to some extent to gender differences in risk aversion, feedback preferences or fondness for competition. To test why women and men have different preferences or risk attitudes, two recent IZA Discussion Papers by IZA Fellow Alison Booth (Australian National University and University of Essex) and Patrick Nolen (University of Essex) examine the effect of single-sex schooling on the risk attitudes of girls. They find that co-ed girls differ more strongly from boys in their attitudes toward risk and competition than girls from single-sex schools. Thus, observed gender differences in behavior under uncertainty might reflect social learning rather than inherent gender traits.

Read more:
- Non-technical summary of the findings
- Complete studies: IZA DP No. 4026 | IZA DP No. 4027

Authored by IZA Research Fellow Robert W. Fairlie and Alicia M. Robb (both University of California, Santa Cruz), a new volume on "Race and Entrepreneurial Success" (MIT Press) examines racial disparities in business performance in the United States. Rates of business ownership among African Americans are much lower, their businesses tend to have lower sales, fewer employees, lower profits and higher closure rates. In contrast, Asian American-owned businesses appear to be more successful. But why is this? The new book provides comprehensive estimates of recent trends in minority business ownership and performance. It examines the importance of human capital und family background as well as the crucial relevance of startup money. Minority entrepreneurship experts Fairlie and Robb contribute a long-needed analysis that is strongly recommended to policy makers not only in the US. The volume and its authors are closely connected to ongoing IZA research in the field which has received support by VolkswagenFoundation and other renowned partners.

M. Caliendo

As of February 2009, Marco Caliendo has become Director of Research at IZA. In close cooperation with IZA Director Klaus F. Zimmermann, he will coordinate all research activities of the institute. Caliendo succeeds Daniel S. Hamermesh (University of Texas at Austin), who held this post until the end of 2008.

Caliendo, born 1974, joined IZA in August 2007 and has worked closely with IZA Program Director Gerard van den Berg (Free University of Amsterdam) in advancing the methodology and research activities in the area of program evaluation. After receiving his Ph.D. from Goethe University Frankfurt in 2005, he spent two years at the German Institute for Economic Research (DIW Berlin). His research interests include the evaluation of labor market programs, self-employment/entrepreneurship, the influence of personality traits on economic outcomes, and applied microeconometrics. His work has been published in various major journals in the field.

"Our new Research Director certainly has all it takes to succeed in this position: broad expert knowledge, a dynamic research attitude, and a clear grasp of policy-relevant issues," said IZA Director Zimmermann during the announcement of Caliendo's appointment, which underscores IZA's strong ambition to play a leading role in policy-oriented labor market research.

At the same time, Zimmermann announced that several highly renowned international labor economists will stay at IZA for an extended period of time as Visiting Research Fellows, among them Peter J. Kuhn (University of California, Santa Barbara), David G. Blanchflower (Dartmouth College) and Daniel S. Hamermesh. This close collaboration with senior researchers from abroad is part of IZA's strategy to further enhance its global network in research and policy advice.

In its report to the "Commission on the Future of NRW" installed by state premier Jürgen Rüttgers, the working group on economic and labor market policy chaired by IZA Director Klaus F. Zimmermann recommends a systematic expansion of the region's potential in higher education and energy innovation. In addition, the improvement of family-related services is considered to be of strategic importance.

Further reading:
- complete report (in German)
- media coverage (by WAZ)

IZA Director Klaus F. Zimmermann has sharply criticized the current debate over the magnitude of the economic crisis. "We are witnessing an ongoing competition for the direst growth forecasts, which is as unnecessary as the premature calls for nationalizing the outcomes of entrepreneurial failure. Such forecasts are dangerous because they fuel the fear of recession. As economists we should concentrate on formulating concrete policy recommendations to achieve a sustainable recovery. Tea leaf reading is certainly the wrong approach," said Zimmermann. In an article published by Wirtschaftsdienst, he explained his proposal to temporarily suspend the practice of issuing regular growth forecasts in times of great economic uncertainty.

Read the complete article (in German): "Prognosekrise: Warum weniger manchmal mehr ist"

G. van den Berg

Gerard J. van den Berg, IZA Program Director for "Evaluation of Labor Market Programs", has been awarded an Alexander von Humboldt Professorship. The Alexander von Humboldt Foundation announced this decision in Bonn on February 27, 2009. Van den Berg is the first economist to receive this honor.

The Humboldt Professorship, supported by the Federal Ministry of Education and Research, honors researchers of all disciplines from abroad who are internationally recognized as leaders in their field. Gerard van den Berg, currently a Professor at VU University Amsterdam and affiliated with various international networks, will receive 3.5 million euros in order to pursue his ground-breaking research at the University of Mannheim to "help turn one of Germany's top economic research universities into an internationally leading institution," according to the Humboldt Foundation.

IZA Director Klaus F. Zimmermann welcomed the selection of Gerard van den Berg: "He is one of the most eminent experts in his field and has been active in Germany for a long time through his affiliation with IZA. He will certainly bring additional dynamism to the German research community. The Alexander von Humboldt Foundation has made an excellent choice."

F. Lange, K. F. Zimmermann

On January 4, 2009, IZA Director Klaus F. Zimmermann presented the third IZA Young Labor Economist Award to Fabian Lange (Yale University) during an IZA reception held at the Annual Meetings of the Allied Social Science Associations (ASSA) in San Francisco. The award honors an outstanding paper published by young labor economists under the age of 40. The selection committee – consisting of Zimmermann and the IZA Program Directors – chose Lange's contribution on "The Speed of Employer Learning" (Journal of Labor Economics, 2007) from a large number of nominations submitted by IZA Research Fellows and Affiliates.

During the award ceremony, Zimmermann said the selected paper "demonstrates impressively how the combination of careful theoretical analysis and rigorous empirical work can provide new insights into important labor market questions." The paper proposes a model to estimate the speed at which employers learn about the actual productivity of workers hired on the basis of job signals such as schooling. The empirical analysis suggests that employers learn fast, with initial expectation errors declining by 26% in the first year and about 50% within three years. Lange also shows that signaling accounts for less than 15% of the overall gains from an additional year of schooling.

In his acceptance speech, Fabian Lange thanked his advisors and fellow students at the University of Chicago and his colleagues at Yale who have inspired his award-winning work. As a German scholar in the United States, he also acknowledged IZA's role as a "bridge between the European and American research communities."

D. Blanchflower

In January 2009, David G. Blanchflower became IZA Program Director for the "Future of Labor" research program. Blanchflower succeeds Daniel S. Hamermesh, who coordinated the research activities in this area from 2001 to 2008 before becoming IZA Director of Research. "We are very happy to fill this position with one of Europe's most renowned economists. While continuing Dan Hamermesh's excellent work, he will also contribute his own ideas. Particularly in view of the current financial crisis, the 'Future of Labor' is certainly one of the most topical research fields in which IZA is active", said IZA Director Klaus F. Zimmermann during the announcement of Blanchflower's appointment.

Blanchflower received his Ph.D. from the University of London and has been a Professor of Economics at Dartmouth College since 1993. In 1999 he joined the IZA network as a Research Fellow. Holding a dual British-American citizenship, Blanchflower is not only active in academia but also in policy advice. Since 2006 he has been on the Monetary Policy Committee of the Bank of England.

Blanchflower has published in various international journals and edited a number of books on labor market issues. His current research interests are related to trade unions, entrepreneurship, wage determination and youth unemployment.

C. Schmidt

IZA Research Fellow Christoph M. Schmidt will succeed Bert Rürup as a member of the German Council of Economic Experts. IZA Director Klaus F. Zimmermann welcomed the appointment of Schmidt, who has been part of the IZA network since 1998 and served as IZA Program Director for "Evaluation of Labor Market Policy" until he was elected President of RWI Essen in 2002.

Christoph M. Schmidt is a highly renowned labor market expert. In close cooperation with Zimmermann, he shaped the early years of IZA's agenda in the important field of evaluation research. Schmidt had spent much of his career working for and with Zimmermann, who supervised his habilitation at the University of Munich in 1995. The RWI President still maintains close ties to IZA as a Research Fellow. "Christoph Schmidt is an ideal candidate for the succession of Bert Rürup, particularly in these times of economic crisis," said Zimmermann. "The Council will certainly benefit from his outstanding analytical skills and his drive to find sustainable solutions to urgent problems of economic policy."

U. Sunde

In its series on Germany's top young scholars, the business daily "Handelsblatt" ran a feature on IZA staff member Uwe Sunde, who was an IZA staff researcher from 2001 until 2008 before he became Professor of Economics at the University of St. Gallen. Sunde, who according to the article is "one of the most productive German-speaking economists," is an active member of the IZA fellow network and maintains close ties to his former teacher and Ph.D. advisor, IZA Director Klaus F. Zimmermann. The complete article (in German) is viewable online on the Handelsblatt website.

B. Chiswick

IZA Program Director Barry R. Chiswick will be honored for his academic merits and contributions to the Lund University School of Economics by an Honorary Doctor Degree of Economics. The renowned Swedish university’s Faculty of Economics and Management recognizes Chiswick’s scientific work in the field of immigration research that belongs to his core activities at IZA as well. The formal ceremony will take place on 29 May at Lund University.

P. Bevelander

The question how citizenship influences the economic success of immigrants is of great interest for a sustainable migration and integration policy. While generous immigration rules would suggest a stricter naturalization strategy, early offers to acquire citizenship make sense if immigrants are actively selected. IZA devotes extensive research to this topic, some of which is carried out as part of the project "The Economics and Persistence of Migrant Ethnicity", which receives substantial funding from the VolkswagenFoundation (cf. IZA Compact, July 2008). IZA Director Klaus F. Zimmermann and IZA Program Director Amelie F. Constant (George Washington University, DIW DC and IZA) coordinate this project, which puts much emphasis on the analysis of the economic effects of naturalization policies. The recently released volume "The Economics of Citizenship" is based on pivotal research results. This book, edited by the renowned migration experts and IZA Research Fellows Don J. DeVoretz (Simon Fraser University) and Pieter Bevelander (Malmö University), is a collection of current analyses of the experiences in Canada, Norway, Sweden, the Netherlands and the U.S. It provides a convincing call for a political concept that makes use of the positive economic effects of immigrant selection and naturalization.

D. DeVoretz

The book attempts to provide an economic model to predict immigrant ascension to citizenship and its impact on the labour market and the public finance spheres. The results indicate that a country’s immigrant selection process and the actions of the immigrants themselves as they await citizenship affect the size of the economic premium derived from citizenship acquisition. This premium takes the form of increased earnings, greater tax payments, and less use of publically funded services. For example, the lifetime net contribution to the Canadian treasury per Canadian immigrant household rises from $35,000 to $68,000 after citizenship acquistion. In addition, naturalized Canadians earn 15 to 30% more over their lifetimes than non-citizens. Other countries reviewed in the book also produce substantial citizenship premiums. Thus, the authors conclude that rigourous immigrant selection procedures, coupled with a generous citizenship policy, yield substantial economic premiums.

In sum, the evidence in the book strongly suggests that it is a process of ”triple selection” which ultimately yields large citizenship premimums. First, strong economic immigrants should be attracted by the official immigration policy, then a points system is to reinforce this positive selection and finally those immigrants who choose to naturalize equip themselves with human capital to garner the citizenship premium.