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Abstract

The authors examine job durations of German workers using the Linked Employer–Employee Data of the Institute for Employment Research (LIAB). Results indicate that exit rates are strongly influenced by firm characteristics, such as the existence of works councils and the opportunity for further training. The effects of these characteristics, however, are limited to jobs held by blue-collar workers or by those possessing vocational–educational skills. Changes in coefficients across specifications provide clear evidence for a sorting process whereby workers with expected long job durations are matched to firms offering stable employment and vice versa. An extension of the model to a competing-risks framework shows that both individual-level and firm-level characteristics differ greatly in their effects on worker job exits to unemployment and to new jobs. Evidence suggests that works councils decrease exits to both states, but only for blue-collar workers.

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