The German Labour Market Miracle
AbstractThis 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.
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Bibliographic InfoArticle provided by National Institute of Economic and Social Research in its journal National Institute Economic Review.
Volume (Year): 214 (2010)
Issue (Month): 1 (October)
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Labour market; Great Recession; employment; wage moderation; short-time work;
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- Michael C. Burda & Jennifer Hunt, 2011.
"What Explains the German Labor Market Miracle in the Great Recession?,"
SFB 649 Discussion Papers
SFB649DP2011-031, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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