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Transitions in the German labor market: Structure and crisis

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  • Krause, Michael U.
  • Uhlig, Harald

Abstract

Since the so-called Hartz IV reforms around 2005 and during the global crisis of 2008/2009, the German labor market featured mainly declining unemployment rates. We develop a search and matching model with heterogeneous skills to explore the role of structural and cyclical policies for this performance. Calibrating unemployment benefits to approximate legislation before and after the reforms, we find a large reduction in unemployment and its duration, with the transition concluding after about three years. During the crisis, the extended use of short-time labor subsidies that prevent jobs from being destroyed is likely to have prevented strong increases in unemployment. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2011,34.

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Date of creation: 2011
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Handle: RePEc:zbw:bubdp1:201134

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Keywords: German Hartz IV reforms; search and matching; unemployment benefits; labor subsidies;

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  1. Fahr, René & Sunde, Uwe, 2009. "Did the Hartz Reforms Speed-Up the Matching Process? A Macro-Evaluation Using Empirical Matching Functions," Munich Reprints in Economics 20482, University of Munich, Department of Economics.
  2. Makoto Nakajima, 2011. "A Quantitative Analysis of Unemployment Benefit Extensions," Global COE Hi-Stat Discussion Paper Series gd10-175, Institute of Economic Research, Hitotsubashi University.
  3. Wouter J. den Haan & Christian Haefke & Garey Ramey, 2005. "Turbulence And Unemployment In A Job Matching Model," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1360-1385, December.
  4. 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.
  5. 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.
  6. Michael U. Krause & Thomas A. Lubik, 2010. "On-the-job search and the cyclical dynamics of the labor market," Working Paper 10-12, Federal Reserve Bank of Richmond.
  7. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
  8. James Costain & Michael Reiter, 2005. "Business Cycles, Unemployment Insurance and the Calibration of Matching Models," Working Papers 215, Barcelona Graduate School of Economics.
  9. Ch. Pissarides., 2011. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
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  12. Ljungqvist, Lars & Sargent, Thomas J., 2007. "Understanding European unemployment with matching and search-island models," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2139-2179, November.
  13. René Fahr & Uwe Sunde, 2009. "Did the Hartz Reforms Speed-Up the Matching Process? A Macro-Evaluation Using Empirical Matching Functions," German Economic Review, Verein für Socialpolitik, vol. 10, pages 284-316, 08.
  14. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
  15. Wolfgang Ochel, 2005. "Hartz IV – Welfare to Work in Germany," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 3(2), pages 18-25, 07.
  16. Ljungqvist, Lars & Sargent, Thomas J, 2004. "European Unemployment and Turbulence Revisited in a Matching Model," CEPR Discussion Papers 4183, C.E.P.R. Discussion Papers.
  17. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  18. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  19. Eichhorst, Werner & Marx, Paul, 2009. "Reforming German Labor Market Institutions: A Dual Path to Flexibility," IZA Discussion Papers 4100, Institute for the Study of Labor (IZA).
  20. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
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  1. Lecciones de las reformas Hartz. ¿Cómo curar al nuevo enfermo europeo?
    by Marcel Jansen in Nada Es Gratis on 2014-03-03 07:00:56
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