Research > Equity, Inclusion & Opportunity

Equity, Inclusion & Opportunity

Inequality creates segregation and exclusion and can lead to political radicalisation and endanger democratic institutions. It has many different causes and presents itself in many different forms. To date, particular attention has been given to inequality in income and earnings, but these are far from the only dimensions of inequality. The issues related to inequality are complex and manifold; including re-distributive institutions, the housing market, intergenerational transmission of opportunity, generational disadvantage and demographic development, and exclusion and discrimination.


Understanding Regional Inequalities: Technology, Education and Policies for Levelling Up

Regional inequalities in rich economies such as Germany are staggering. The richest county in Germany is nearly ten times as rich as the poorest county. What is more, there is surprisingly little convergence over time between regions. This is a puzzle, as theory predicts that regions initially lagging behind are bound to catch up with more developed regions, as has historically been the case in the US. We aim to study the roots of these regional disparities by tracing them back to the beginnings of technological inventions, in particular technological and educational investments during and after the Industrial Revolution as well as policy choices, past and present. Understanding the origins of regional inequalities and the reasons for their persistence is of paramount importance as they determine inequality of opportunities not only in the present, but also moving into the future. Our analysis will investigate the mechanisms behind persistence in disadvantage, thereby shedding light on policy choices conducive to overcoming historical disadvantages. This project will not only contribute to our understanding of regional inequalities in contemporary Germany but will also have important implications for policy decisions to be made during the AI revolution, with consequences for future growth and prosperity.

Project Participants:

Hyejin Ku (University College London)

Knowledge Spillover and Individual Careers

Workers obtain skills not only through formal education and training, but also through learning by doing at the workplace. Such skill acquisition at the workplace may partly operate through learning from coworkers. However, evidence on knowledge spillover among co-workers is still inconclusive, and most existing evidence has focused on high-skilled workers. This project will produce the first study to provide direct micro-level evidence on knowledge spillover from well-trained workers (apprenticeship graduates) onto their lower skilled coworkers. The main part of the project focuses on knowledge spillover onto unskilled labour market entrants without formal qualifications, a group that is vulnerable to job loss and low labour market attachment. In an extension, the analysis will shift to other groups of workers whose skills are low or require updating, most notably immigrant workers (whose skills require adaptation to the host country labour market) or older workers (whose skills may have become obsolete due to technological change). Knowledge spillovers at the workplace have obvious important implications: in the presence of knowledge spillovers, the return to investment into training can be far larger than the sum of returns to trained workers.

Project Participants:

Christian Dustmann (University College London)
Uta Schönberg (University College London)

Globalisation, Welfare and Economic Espionage

Economic espionage is a pervasive phenomenon around the world with potentially dramatic effects on the welfare of affected nations. In the United States and Germany alone, the economic damages caused by this illicit activity are estimated to amount to around 400 billion dollars and 100 billion euros per year respectively. Besides harming the targeted countries, economic espionage may also generate substantial benefits for the perpetrating countries. Yet, despite its economic importance and frequent appearance in current public debates, there exists hardly any quantitative evidence on the effects of economic espionage on the economy and society at large.

This project addresses various related questions on the role of economic espionage. We will investigate how and to what extent economic espionage generates tangible benefits for the perpetrating country, using unique micro-level data that provide a full account of East Germany’s spying activities in the West during the Cold War period. We will also analyse how espionage-based international knowledge flows today affect productivity growth and innovation, relating changes in measurable outcomes such as sectoral TFP to changes in the presence of a country’s own nationals in other foreign economies. Third, we will collect novel data by including a topic module on industrial espionage in a large longitudinal employer survey in Germany, allowing us to conduct a comprehensive firm-level analysis of the prevalence, perception, and impact of industrial espionage in contemporary Germany.

Project Participants:

Adrian Lerche (Institute for Employment Research, Nuremberg)
Lukas Mergele (ifo Institute, Munich)
Erqi Ge (Sun Yat-sen University, Guangzhou)

Productivity, Skills and Competitiveness: Challenges of the Global Economy

Industrialised economies had to adjust to substantial changes in the nature of the global economy over the preceding decades as China and other middle- and lower-income economies were increasingly integrated into global trade and production networks, and as technological changes induced further changes in production patterns. This project examines important and interrelated research questions addressing both the immediate and the longer run implications of these events: First, how relevant are indirect ‘upstream’ production chain effects (in addition to the direct effects) when it comes to the impact of trade on the labour market? Second, why were some advanced economies better positioned to take advantage of this wave of increased global trade—contrast Germany which took advantage of the opportunities brought about by this second wave of globalisation with other countries like the US that were less able to do so? Third, what is the technological adoption component of globalisation, again taking into account indirect ‘upstream’ and ‘downstream’ effects of differentiated technology adoption on labour market outcomes?

Project Participants:

Christian Dustmann (University College London)
Bernd Fitzenberger (Friedrich-Alexander-Universität Erlangen-Nürnberg and Institute for Employment Research, Nürnberg)
Alexandra Spitz-Oener (Humboldt-Universität zu Berlin)
Stan de Ruijter van Steveninck (University College London)
Jan Knuf (University College London)

Technology and Work

Most recent research on the impact of technology on the labour market focuses on automation, that is the ability of advanced technologies to substitute workers in performing routine, programmable tasks. However, the interplay between workers and technologies is much more complex. Digital tools complement the creative and analytical capabilities of workers, for example, and new tasks arise. In this project, we will shed light on the question of how workers whose jobs are subject to technology-driven adjustment shocks change the tasks they perform, paying particular attention to new tasks and tasks that are complementary to the capabilities of advanced technologies. The analyses will cover about 4 decades, from the late 1970s to the late 2010s, thereby covering the complete current phase of technological changes involving computers, software, robots, and other advances in computer technology, including artificial intelligence. The data allow to investigate how the changing capabilities of technology impact skill requirements at the workplace and, most importantly, workers’ labour market outcomes in terms of job quality, employment, and wages.

Project Participants:

Giuseppe Pulito (ROCKWOOL Foundation Berlin)
Joonas Tuhkuri (ROCKWOOL Foundation Berlin)

Institutions, Wage Setting and Labour Market Performance in Continental Europe: Evidence from Italy

Since the Great Recession, labour market institutions in continental Europe have been put into question, with many observers pointing to excessive rigidity in wage setting as a key concern.

This project explores the interplay between wage setting institutions and labour market performance, especially during periods of economic downturn. We analyse two cases: i) the decentralization in collective bargaining through firm opt-out clauses; ii) the imposition of salary caps to public managers. Our focus is on Italy, a country whose economic crises are a major concern for the European Union and where recent developments provide an ideal laboratory for analysis.

Both projects leverage detailed administrative matched employer-employee data on all workers and firms in Italy, made available by the Italian Social Security Institute (INPS) through competitive calls. The first project sheds light on the consequences of firm opt-outs from centralized collective bargaining agreements to negotiate working conditions (including wages) directly with workers. Opt-outs have been proposed as an adjustment tool for firms to navigate periods of economic distress but have received little attention in the empirical literature. By identifying firm opt-outs in the data, we will be able to answer key questions related to their effects on firms and workers. Do they improve firm performance relative to firms that do not exercise such clauses? What happens to the wage and employment trajectory of the workers involved? The second project studies the introduction of a salary cap for public managers introduced in Italy in 2014 to cut public spending. Despite the popularity of this type of policy in Europe, there is little knowledge about its effects and about public managers, who play a crucial role in overseeing the delivery of public services and supervising policy implementation.

By exploiting the clear design of the law, we will investigate the impact of the wage cap on the employment trajectories of public managers and on the selection of managerial talent in the public sector, as well as any spillover effects to other sectors of the economy.

Project Participants:

Chiara Giannetto (University College London)
Lorenzo Incoronato (University College London)

Workplace connections, migration, and firm quality: evidence from German reunification

Modern labor markets display substantial inequality across regions and along gender lines. One reason for that is a lack of information about labor market opportunities.

This project examines the role of informational friction. It consists of two closely related sub-projects, which assess whether pre-established social connections at the workplace can help bridge the informational gap about labor market opportunities and help reduce inequalities in labor market outcomes.

The project is set against the backdrop of persistent within-country differences between East and West Germany. The unexpected fall of the Iron Curtain in 1989 unified two vastly dissimilar economic systems and triggered extensive population movements. After an initial surge, East-West migration rapidly slowed down. This slowdown was despite continuing economic opportunities and well-being disparities, which are evident even 30 years after reunification. The project first examines how the social connections of East German workers with co-workers who migrated to West Germany earlier can provide information about labor market opportunities in West Germany and whether and how this information is used. It then addresses gender inequality, asking whether gender differences in network connections and how networks are used can explain disparities in labor market outcomes.

Project Participants:

Alexandra Spitz-Oener (Humboldt-Universität zu Berlin)

Boosting business: the impact of worker representation

Co-determination within firms has been a focal point in policy debates in numerous countries (for example, Bryson and Freeman, 2012; Kochan et al., 2019). It is, however, not an easy subject to study. A rigorous analysis of the costs and benefits of co-determination requires good data, institutional knowledge, and convincing identification strategies.

Focusing on Denmark, this project explores how work councils influence outcomes at firm and worker levels. Cooperation committees, the Danish equivalent of German works councils, are recommended for firms with over 35 employees; firms must establish a committee if the majority of workers request it. Consequently, not all firms form a committee, providing a research design that allows for evaluating the effects of having a committee versus not.

This project differs from recent literature on worker co-determination in two major ways. First, it concentrates on work councils (cooperation committees in Denmark) rather than board representation of workers. Second, it examines broader outcomes than wages and firm efficiency, such as workplace quality, worker motivation, health outcomes, and absenteeism.

Project Participants:

Alexandra Spitz-Oener (Humboldt-Universität zu Berlin)

Labor Market Networks, Efficiency, and Inequality

Social connections play a crucial, but ambiguous role in the labor market. On the one hand, efficiency may be improved through, for example, lower search frictions. But on the other hand, “knowing the right people” may allow workers to end up in jobs for which their skills are not well-suited.

This project will use detailed data on all employer-employee matches in Denmark from 1980-2020 to study how social connections shape the allocation of workers in the labor market. By identifying former co-workers, family-members, and former schoolmates, we will also be able to distinguish between the importance of different types of networks. Equipped with a full mapping of social connections for the entire working age population in Denmark, we will investigate how working in the same workplace as a “network member” affects match quality and efficiency in the labor market, whether connections lead to over- or undereducation in various jobs, and whether connections generate between-group inequality (e.g., by family background or gender).

The findings from the proposed research will have important policy implications for a wide range of questions relating to efficiency, inequality, and firms’ hiring practices at both aggregate and more granular levels. Our findings will also contribute to the ongoing debate surrounding anti-nepotism and anti-cronyism rules in the public and private sectors.

Project Participants:

Rasmus Landersø (ROCKWOOL Foundation Research Unit)
Shmuel San (Hebrew University of Jerusalem)
Uta Schönberg (University College London)

Inequality and housing

Buying a house or an apartment is one of the most important economic decisions individuals make over their life cycle. Whether to buy, when to buy, and where to buy real estate not only have important implications for the accumulation of wealth, it also influences a wide range of life outcomes relating to, for example, children’s opportunities.

This project uses detailed administrative data on all individuals and residential units in Denmark from 1980-2021 including information on income, assets, liabilities, real estate ownership, and home addresses. The project will identify the consequences of housing policies and economic shocks at both the household, neighborhood, and regional level.

The findings from the project will have substantial policy implications for a wide range of questions relating to the housing market, segregation, and inequality both within and between generations. Furthermore, the results will provide important insights on how to mitigate inequality of opportunity through differences in areas of upbringing.

Project Participants:

Christian Dustmann (University College London)
Mikkel Mertz (ROCKWOOL Foundation Research Unit)