Lower Wages for Less Hours? A Simultaneous Wage-Hours Model for Germany

Productivity growth has been slow in many continental European countries overthe last few decades, especially in comparison with the United States. It has been argued thatlack of product market competition and poor corporate governance are two of the main reasonsfor this phenomenon. However, predictions from theoretical models are far from unambiguous,and empirical evidence is sparse, in particular at the level of individual firms. In thispaper, we aim to close this gap with an econometric analysis of firm performance in Germany.Based on a unique panel data set with detailed information on almost 400 manufacturingfirms over the 1986-94 period, we find that firms operating in industries which are characterizedby more intensive product market competition experience higher rates of productivitygrowth. We also find weak evidence for the notion that in Germany's bank-based systemof internal control, ownership concentration is harmful for productivity growth.

Wolf, Elke (2000), Lower Wages for Less Hours? A Simultaneous Wage-Hours Model for Germany, ZEW Discussion Paper No. 00-03, Mannheim.