The Department of Business and Management Science and NoCeT invite you to a faculty seminar with Charlotte Bartels, University of Leipzig.
We analyze the impact of tying preferential tax treatment of family firms undergoing succession to an employment preservation clause (EPC), which requires the new owners to maintain a specified fraction of the firm’s pre-transfer wage bill. Exploiting the 2016 extension of the German EPC to firms with 6–20 employees and linked ORBIS-IAB employer-employee data, we show that exposed firms forgo employment growth and shift the workforce toward cheaper labor. The composition shift begins before the transfer, while pre-transfer headcount remains unchanged.
After the transfer, an employment gap opens: within five years, exposed firms are about 4 percent smaller than comparable non-family transfers and pay about 4 percent lower average wages, with no detectable change in revenue or productivity. These intention-to-treat estimates suggest that employment preservation clauses secure wage-bill stability at the cost of slower growth in succeeding firms.