August 2010

IZA DP No. 5117: Extensive vs. Intensive Margin in Germany and the United States: Any Differences?

published in: Applied Economics Letters, 2011, 18 (9), 805-808

This paper analyzes the role of the extensive vis-à-vis the intensive margin of labor adjustment in Germany and in the United States. The contribution is twofold. First, we provide an update of older U.S. studies and confirm the view that the extensive margin (i.e., the adjustment in the number of workers) explains the largest part in the overall variability in aggregate hours. Second, although the German labor market structure is very different from its U.S. counterpart, the quantitative importance of the extensive margin is of similar magnitude.