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Labor Market Policy in the Great Recession: Some Lessons from Denmark and Germany

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  • John Schmitt

Abstract

This paper reviews the recent labor-market performance of 21 rich countries, with a focus on Denmark and Germany. Denmark, which was widely seen as one of the world's most successful labor markets before the downturn, has struggled in recent years. Germany, however, has outperformed the rest of the world's rich countries since 2007, despite earlier labor-market difficulties. Labor-market institutions seem to explain the different developments in the two economies. Danish institutions – which include extensive opportunities for education, training, and placement of unemployed workers – appear to perform well when the economy is at or near full employment, but have not been effective during the downturn. German labor-market institutions, which emphasize job security by keeping workers connected to their current employers, may have drawbacks when the economy is operating at or near full employment, but have performed well in the Great Recession. The paper also discusses lessons for U.S. labor-market policy.

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Bibliographic Info

Paper provided by Center for Economic and Policy Research (CEPR) in its series CEPR Reports and Issue Briefs with number 2011-12.

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Length: 25 pages
Date of creation: May 2011
Date of revision:
Handle: RePEc:epo:papers:2011-12

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Keywords: Great Recession; recession; labor; labor policy;

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References

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  1. Cahuc, Pierre & Carcillo, Stéphane, 2011. "Is Short-time Work a Good Method to Keep Unemployment Down?," CEPR Discussion Papers 8214, C.E.P.R. Discussion Papers.
  2. Kenworthy, Lane, 2008. "Jobs with Equality," OUP Catalogue, Oxford University Press, number 9780199550609, September.
  3. Mary Daly & Bart Hobijn & Rob Valletta, 2011. "The recent evolution of the natural rate of unemployment," Working Paper Series 2011-05, Federal Reserve Bank of San Francisco.
  4. Dean Baker, 2009. "Pay for Play? Tax Credits for Paid Time Off," CEPR Reports and Issue Briefs 2009-13, Center for Economic and Policy Research (CEPR).
  5. John Schmitt & Jonathan Wadsworth, 2002. "Is the OECD Jobs Strategy Behind US and British Employment and Unemployment Success in the 1990s?," SCEPA Working Papers 2002-06, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  6. John Schmitt & Kris Warner, 2011. "Deconstructing Structural Unemployment," CEPR Reports and Issue Briefs 2011-06, Center for Economic and Policy Research (CEPR).
  7. Justin Weidner & John C. Williams, 2011. "What is the new normal unemployment rate?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue Feb 14.
  8. Wayne Vroman & Vera Brusentsev, 2009. "Short-Time Compensation as a Policy to Stabilize Employment," Working Papers 09-10, University of Delaware, Department of Economics.
  9. Carlin, W.J. & Soskice, D., 2009. "German economic performance: disentangling the role of supply-side reforms, macroeconomic policy and coordinated economy institutions," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
  10. Alexander Hijzen & Danielle Venn, 2011. "The Role of Short-Time Work Schemes during the 2008-09 Recession," OECD Social, Employment and Migration Working Papers 115, OECD Publishing.
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Cited by:
  1. Jun Nie & Ethan Struby, 2011. "Would active labor market policies help combat high U.S. unemployment?," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 35-69.

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