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What hides behind the German labor market miracle? A macroeconomic analysis

Author

Listed:
  • Moritz Kuhn

    (University of Bonn)

  • Philip Jung

    (Bonn University)

Abstract

The Hartz reforms in the early 2000s have reshaped the German labor market and have led to what many observers call the "German labor market miracle". This paper closes a gap in the evaluation of the reforms by providing a macroeconomic analysis of the effects of the reform on worker flows. We use SIAB micro data to construct worker flow series between employment and unemployment for the period from 1980 to 2010. To disentangle cyclical from long-run effects, we construct a new data series using unemployment benefit claims to extend worker flow series until 2014. Using this new data, we show that 40 % of the decrease in unemployment is accounted for by cyclical movements in the separation rate. The remaining 60 % are accounted for by the reversed secular decline in Germany's job finding rate. We complete our analysis by a structural analysis based on a search and matching model of the German labor market. We estimate the effects of each of the four reform steps (Hartz I-IV) to provide an answer to the question which part of the reform has been most important in generating Germany's labor market miracle.

Suggested Citation

  • Moritz Kuhn & Philip Jung, 2015. "What hides behind the German labor market miracle? A macroeconomic analysis," 2015 Meeting Papers 614, Society for Economic Dynamics.
    • Handle: RePEc:red:sed015:614
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    References listed on IDEAS

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    1. Gartner, Hermann & Merkl, Christian & Rothe, Thomas, 2012. "Sclerosis and large volatilities: Two sides of the same coin," Economics Letters, Elsevier, vol. 117(1), pages 106-109.
    2. Philip Jung & Moritz Kuhn, 2014. "Labour Market Institutions and Worker Flows: Comparing Germany and the US," Economic Journal, Royal Economic Society, vol. 124(581), pages 1317-1342, December.
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    7. Mr. Tom Krebs & Mr. Martin Scheffel, 2013. "Macroeconomic Evaluation of Labor Market Reform in Germany," IMF Working Papers 2013/042, International Monetary Fund.
    8. Gartner, Hermann & Merkl, Christian & Rothe, Thomas, 2009. "They Are Even Larger! More (on) Puzzling Labor Market Volatilities," IZA Discussion Papers 4403, Institute of Labor Economics (IZA).
    9. Andrey Launov & Klaus Wälde, 2013. "Estimating Incentive And Welfare Effects Of Nonstationary Unemployment Benefits," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 1159-1198, November.
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    Cited by:

    1. Hartung, Benjamin & Jung, Philip & Kuhn, Moritz, 2016. "Etiopathology of Europe's Sick Man: Worker Flows in Germany, 1959-2016," IZA Discussion Papers 10341, Institute of Labor Economics (IZA).
    2. Moritz Kuhn, 2017. "The Research Agenda: Moritz Kuhn on Understanding income and wealth inequality," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 18(1), April.

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