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The fall in german unemployment: A flow analysis

Author

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  • Carrillo-Tudela, Carlos
  • Launov, Andrey
  • Robin, Jean-Marc

Abstract

In this paper we investigate the recent fall in unemployment, and the rise in part-time work and labour market participation among prime-aged Germans. We show that unemployment fell because the Hartz reforms induced a large fraction of the long-term unemployed to deregister as jobseekers. However, labour force participation actually increased because many female non-participants accepted low-paid, part-time jobs. Counterfactual simulations using estimated transition probabilities show that observed changes in the stocks of registered and unregistered unemployment after 2002 essentially resulted from changes in their outflows. These changes are also the main determinants of the dynamics of the stocks of marginal, contributing part-time and full-time employment after 2002. Yet the full decrease in registered male unemployment cannot be explained by the reforms alone.

Suggested Citation

  • Carrillo-Tudela, Carlos & Launov, Andrey & Robin, Jean-Marc, 2021. "The fall in german unemployment: A flow analysis," European Economic Review, Elsevier, vol. 132(C).
  • Handle: RePEc:eee:eecrev:v:132:y:2021:i:c:s0014292121000118
    DOI: 10.1016/j.euroecorev.2021.103658
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    3. Christian Merkl & Timo Sauerbier, 2024. "Public Employment Agency Reform, Matching Efficiency, and German Unemployment," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(1), pages 393-440, March.
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    7. Hochmuth, Brigitte & Kohlbrecher, Britta & Merkl, Christian & Gartner, Hermann, 2021. "Hartz IV and the decline of German unemployment: A macroeconomic evaluation," Journal of Economic Dynamics and Control, Elsevier, vol. 127(C).
    8. Maia Güell & Cristina Lafuente & Manuel Sánchez & Hélène Turon, 2022. "So different yet so alike: micro and macro labour market outcomes in Germany and Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 13(1), pages 147-169, May.
    9. Beckmannshagen, Mattis & Schröder, Carsten, 2022. "Earnings inequality and working hours mismatch," Labour Economics, Elsevier, vol. 76(C).
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    11. Cardullo, Gabriele & Sechi, Agnese, 2023. "Local Labor Markets with Non-homothetic Preferences," IZA Discussion Papers 16533, Institute of Labor Economics (IZA).
    12. Yamil Arturo Chandía-Rodríguez & Rodrigo Linfati & Guillermo Murillo-Vargas & John Willmer Escobar, 2024. "Valuation of Active Chilean Employment Support Policies Seeking Economic Sustainability through Market Flows," Sustainability, MDPI, vol. 16(2), pages 1-20, January.
    13. Alisa Tazhitdinova, 2022. "Increasing Hours Worked: Moonlighting Responses to a Large Tax Reform," American Economic Journal: Economic Policy, American Economic Association, vol. 14(1), pages 473-500, February.
    14. Bachmann, Ronald & Felder, Rahel & Tamm, Marcus, 2018. "Labour market participation and atypical employment over the life cycle: A cohort analysis for Germany," Ruhr Economic Papers 786, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    15. Tom Günther & Ulrich C. Schneider & Fabian Stürmer-Heiber, 2023. "Working More for Less: Part-time Penalties Across the Working Hours Distribution?," Berlin School of Economics Discussion Papers 0025, Berlin School of Economics.
    16. Andrey Launov, 2021. "Working Time Accounts and Turnover," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(3), pages 1025-1056, July.
    17. Patricia Gallego Granados, 2019. "The Part-Time Wage Gap across the Wage Distribution," Discussion Papers of DIW Berlin 1791, DIW Berlin, German Institute for Economic Research.
    18. Laun, Lisa, 2019. "In-work benefits across Europe," Working Paper Series 2019:16, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    19. KITAO Sagiri & MIKOSHIBA Minamo, 2022. "Why Women Work the Way They Do in Japan: Roles of Fiscal Policies," Discussion papers 22016, Research Institute of Economy, Trade and Industry (RIETI).
    20. Flinn, C. & Todd, P. & Zhang, W., 2020. "Personality Traits, Job Search and the Gender Wage Gap," Cambridge Working Papers in Economics 2053, Faculty of Economics, University of Cambridge.
    21. Lea Immel, 2021. "The Impact of Labor Market Reforms on Income Inequality: Evidence from the German Hartz Reforms," ifo Working Paper Series 347, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    22. Rasmus Wiese & Jakob de Haan & João Tovar Jalles, 2023. "The impact of endogenous product and labour market reforms on unemployment: New evidence based on local projections," Working Papers REM 2023/0296, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    23. Salvatore Barbaro & Anna-Sophie Kurella & Maike Roth, 2024. "Electoral outcomes versus voters’ preferences: On the different tales the data can tell," Working Papers 2412, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    24. Tazhitdinova, Alisa, 2020. "Do only tax incentives matter? Labor supply and demand responses to an unusually large and salient tax break," Journal of Public Economics, Elsevier, vol. 184(C).
    25. Joohun Han & Chanjin Chung, 2021. "Impact of Aging and Underemployment on Income Disparity between Agricultural and Non-Agricultural Households," Sustainability, MDPI, vol. 13(21), pages 1-15, October.

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    More about this item

    Keywords

    Germany; Unemployment; Part-time work; Mini-jobs; Non-participation; Wage moderation; Hartz reforms;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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