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The German Labour Market Miracle

Author

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  • Jens Boysen-Hogrefe

    (Kiel Institute for the World Economy, Germany jens.hogrefe@ifw-kiel.de)

  • Dominik Groll

    (Kiel Institute for the World Economy, Germany dominik.groll@ifw-kiel.de)

Abstract

This paper lays out the various reasons for the exceptional performance of the German labour market during and after the Great Recession of 2008/9. The reference point of our analysis is provided by an empirical model of both total hours worked and employment. We conduct dynamic simulations of the crisis period to assess how surprising the reaction of the labour market really was. We argue that the most important precondition for the minor reaction of employment during this crisis was the pronounced wage moderation observed in the years before, which constitutes a distinct difference to all other recessions in Germany. Beyond that, the flexibility of adjusting working time, which has increased considerably during the past ten years, facilitated a tendency to labour hoarding. In contrast, short-time work plays a minor role in explaining the difference from previous recessions, since this instrument has always been available to firms in Germany and its use has not been extraordinary compared with earlier recessions.

Suggested Citation

  • Jens Boysen-Hogrefe & Dominik Groll, 2010. "The German Labour Market Miracle," National Institute Economic Review, National Institute of Economic and Social Research, vol. 214(1), pages 38-50, October.
    • Handle: RePEc:sae:niesru:v:214:y:2010:i:1:p:r38-r50
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    Cited by:

    1. Gehrke, Britta & Lechthaler, Wolfgang & Merkl, Christian, 2017. "The German labor market in the Great Recession: Shocks and institutions," IAB-Discussion Paper 201714, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Hammer, Luisa & Hertweck, Matthias Sebastian, 2022. "EU Enlargement and (Temporary) Migration: Effects on Labour Market Outcomes in Germany," VfS Annual Conference 2022 (Basel): Big Data in Economics 264082, Verein für Socialpolitik / German Economic Association.
    3. Gehrke, Britta & Lechthaler, Wolfgang & Merkl, Christian, 2019. "The German labor market during the Great Recession: Shocks and institutions," Economic Modelling, Elsevier, vol. 78(C), pages 192-208.
    4. Balleer, Almut & Gehrke, Britta & Lechthaler, Wolfgang & Merkl, Christian, 2016. "Does short-time work save jobs? A business cycle analysis," European Economic Review, Elsevier, vol. 84(C), pages 99-122.
    5. Grabka, Markus M., 2015. "Income and Wealth Inequality after the Financial Crisis: The Case of Germany," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 42(2), pages 371-390.
    6. Boysen-Hogrefe, Jens, 2013. "Wie der Staat 2010 bis 2012 konsolidiert hat," Kiel Policy Brief 62, Kiel Institute for the World Economy (IfW Kiel).
    7. Holtemöller, Oliver & Brautzsch, Hans-Ulrich & Drechsel, Katja & Drygalla, Andrej & Giesen, Sebastian & Hennecke, Peter & Kiesel, Konstantin & Loose, Brigitte & Meier, Carsten-Patrick & Zeddies, Götz, 2015. "Ökonomische Wirksamkeit der Konjunktur stützenden finanzpolitischen Maßnahmen der Jahre 2008 und 2009. Forschungsvorhaben im Auftrag des Bundesministeriums der Finanzen," IWH Online 4/2015, Halle Institute for Economic Research (IWH).
    8. Boysen-Hogrefe, Jens & Gern, Klaus-Jürgen & Jannsen, Nils & Plödt, Martin & Van Roye, Björn & Scheide, Joachim & Schwarzmüller, Tim & Groll, Dominik & Kooths, Stefan, 2011. "Weltkonjunktur und deutsche Konjunktur im Winter 2011," Kiel Discussion Papers 498/499, Kiel Institute for the World Economy (IfW Kiel).
    9. Schrader, Klaus & Laaser, Claus-Friedrich, 2012. "Die Krise in Südeuropa oder die Angst vor dem Dominoeffekt: Griechenland, Portugal und Spanien im Krisentest," Kiel Discussion Papers 500/501, Kiel Institute for the World Economy (IfW Kiel).
    10. Bauer, Anja & King, Ian, 2018. "The Hartz reforms, the German Miracle, and labor reallocation," European Economic Review, Elsevier, vol. 103(C), pages 1-17.
    11. Boll, Christina & Boysen-Hogrefe, Jens & Wolf, André, 2017. "Wie viel Soziale Marktwirtschaft steckt in den Wahlprogrammen zur Bundestagswahl 2017?," HWWI Policy Papers 105, Hamburg Institute of International Economics (HWWI).
    12. Richard B. Freeman, 2013. "Failing the Test? The Flexible U.S. Job Market in the Great Recession," The ANNALS of the American Academy of Political and Social Science, , vol. 650(1), pages 78-97, November.
    13. Alessio Brown & Johannes Koettl, 2015. "Active labor market programs - employment gain or fiscal drain?," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-36, December.
    14. Michael C. Burda & Jennifer Hunt, 2011. "What Explains the German Labor Market Miracle in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 273-335.
    15. Dieter Hundt & Frank-Jürgen Weise & Hagen Lesch & Wolfgang Lechthaler & Christian Merkl, 2012. "Euro crisis, Energy Policy Turnaround, Economic Slowdown: is this the End of the German “Job Market Miracle”?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 65(01), pages 03-13, January.
    16. Baumgarten, Daniel & Kvasnicka, Michael, 2017. "Temporary agency work and the Great Recession," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 29-44.
    17. Alexander Herzog-Stein & Fabian Lindner & Simon Sturn, 2013. "Explaining the German Employment Miracle in the Great Recession – The Crucial Role of Temporary Working Time Reductions," IMK Working Paper 114-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    18. Felix Hüfner & Caroline Klein, 2012. "The German Labour Market: Preparing for the Future," OECD Economics Department Working Papers 983, OECD Publishing.
    19. Jennifer Hunt, 2013. "Flexible Work Time in Germany: Do Workers Like It and How Have Employers Exploited It Over the Cycle?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 14(1-2), pages 67-98, February.
    20. Richard B. Freeman, 2013. "Failing the Test? The Flexible U.S. Job Market in the Great Recession," The ANNALS of the American Academy of Political and Social Science, , vol. 650(1), pages 78-97, November.
    21. Anja Bauer & Ian King, 2015. "The Hartz Reforms, the German Miracle, and the Reallocation Puzzle," Discussion Papers Series 550, School of Economics, University of Queensland, Australia.
    22. Boss, Alfred, 2017. "Bundesagentur für Arbeit: Immer höhere Überschüsse?," Kiel Policy Brief 110, Kiel Institute for the World Economy (IfW Kiel).
    23. Christian Merkl & Enzo Weber, 2020. "Raus aus der Neueinstellungskrise! [End the Recruitment Crisis!]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 100(7), pages 507-509, July.
    24. Julio G. Fournier Gabela & Luis Sarmiento, 2020. "Kurzarbeit and Natural Disasters: How Effective Are Short-Time Working Allowances in Avoiding Unemployment?," Discussion Papers of DIW Berlin 1909, DIW Berlin, German Institute for Economic Research.
    25. Vivian Carstensen, 2013. "The German Labor Market Miracle Revisited: Risk Elimination in Working Time Accounts," Eurasian Journal of Social Sciences, Eurasian Publications, vol. 1(1), pages 19-38.

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