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This paper analyzes the differences in labor demand
between family and non-family firms. The majority of firms in modern economies are still family controlled. In addition, these firms seem to exhibit
better employment performance than other companies. Therefore, this study estimates a labor demand
model with German establishment panel data. Moreover, a Heckman correction is introduced to the regressions to avoid selectivity. The results of random effects and fractional panel probit estimations
indicate that own-wage and output elasticities are
lower in absolute values, thus supporting the assumption that family firms offer higher job security and are more risk averse than other establishments. However, this result does not hold if the in
vestigation is restricted to establishments with 20 or
more employees. There is no evidence of different b
ehavior in larger family firms.
The author investigates the different influences of labor shortage on wages in firms with or without collective bargaining agreements. In addition to training, technological solutions, and organizational flexibility, employers can also offer higher wages at a constant employment level to fill vacancies if the current payments are lower than the marginal revenue of the workers. Firms with collective bargaining agreements probably already pay wages according to marginal revenue or, in the case of rent sharing, above it, and the remuneration is probably also not adjusted. Using wage regressions with panel data for German establishments, this paper shows that collective bargaining and a lack of skilled workers can lead to higher wages. However, the latter only applies to firms that are not bound by collective agreements. Hence, wage differentials between these firms decrease, providing further explanation for a countercyclical development of the wage premium from the collective bargaining agreement.
Models of labor demand usually use cost or production functions to derive profit-maximizing firm performance. These models often rely on the assumption of symmetrical behavior,i.e., the response to a positive or negative wage shock of the same relative size is identical to theshock, and the estimated labor demand elasticities are the same for increasing and decreasingemployment. However, behavioral economics models like loss aversion and endowment effectsquestion the assumption of symmetry in labor demand. In addition, the influence of a labor shortageshould be reflected in the investigations. Estimations of Fractional Panel Probit models for threedifferent skill levels are applied to evaluate these findings with a large panel of Germanestablishments. The results indicate asymmetrical structures for long-run own-wage elasticities andfor some cross-wage elasticities, putting some doubt on the assumption of strict rationality in labordemand and indicating the influence of labor shortages.