Research

Most promotions in Germany happen without a change of employer. This project asks how workers climb the two career ladders — inside their firm and across firms — over a working life: who takes which route, how the two routes interact, what each one pays, and how much of the life-cycle wage growth that standard models attribute to human capital or tenure is in fact climbing the internal ladder. I measure internal and external career moves for millions of German workers from online career histories, reweighted to the administrative workforce, price each route with German social-security records, and build a worker-side career model with both routes.

Unemployed workers send far more applications than they used to, but the number of applications says little about which jobs they aim for. We model job search as portfolio choice: a worker picks a mix of ambitious and safe applications, knowing that screening is correlated across firms, so a rejection is bad news everywhere. Two shocks move the portfolio in opposite directions: cheaper search makes it more aggressive, while higher financial pressure makes it safer. In a calibration to German data, matched on the same increase in applications, higher financial pressure raises the job-finding rate substantially, while cheaper search barely moves it.

This chapter discusses the risk-free interest rate term structure, which is published at regular intervals by EIOPA for the calculation of technical provisions under Solvency II. The ultimate forward rate (UFR) plays a key role in this context. In this chapter, it is suggested to base estimates of the ultimate forward rate on the natural rate of return, using a quantitative macroeconomic model. The approach followed a forward-looking mechanism by modeling how demographic change suppresses asset returns because of labour shortage and capital abundance. An analysis is made of the impact of demographic change on asset returns within a large-scale quantitative overlapping generations model that uses inputs from a detailed population projection model for Germany. The analysis suggests that until 2060 the estimate of the real natural rate decreases to −1.7% to −2.1%. From this perspective, negative real interest rates can be expected for the next decades, and nominal rates will be only slightly above zero.