Local Differences in the Wage Elasticity of the Labor Supply to the Firm
| First-Step Specification Second-Step Results (103 Local Labor Markets) | Model I Cox Model with Worker but without Employer Controls | Model II Cox Model with Worker and Employer Controls | Model III Cox Model with Worker and Employer Controls and Plant Wage Effects | Model IV Cox Model with Worker and Employer Controls and Deviating Wage from Plant Wage Effect |
|---|---|---|---|---|
| Log population density | 0.1879 | 0.1486 | 0.1490 | 0.0942 |
| (0.0694) | (0.0658) | (0.0663) | (0.0241) | |
| Constant | 2.4277 | 2.2201 | 2.3771 | 1.4726 |
| (0.0429) | (0.0392) | (0.0390) | (0.0148) |
Notes: IEB and BHP, 1985–2010. Estimates show the second-step regression (Equation 5). The dependent variable is the estimated wage elasticity of the labor supply to the firm obtained from the first-step separation equation (Equation 4), which we model as a Cox model with a worker–region-specific baseline hazard. Further region controls are the shares of low-skilled and high-skilled workers, the log employment share of the largest two-digit industry, and the log Herfindahl index of employment at the industry level where all second-step regressors are centered around their means. In the Cox model, worker controls consist of real experience (linearly and squared), as well as groups of dummies for education, one-digit occupation, and non-German nationality. Employer controls are the shares of part-time, high-skilled, low-skilled, female, and non-German workers among the plant’s workforce, as well as groups of dummies for plant size and two-digit industry. We also add time dummies. In Model III, we further include the plant wage effect from Card, Heining, and Kline (2015) interacted with its reference period. In Model IV, the wage regressor is the deviation of the log wage from the plant wage effect from Card, Heining, and Kline (2015). Robust standard errors are given in parentheses.