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The fall in german unemployment: A flow analysis

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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.

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  • 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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    Cited by:

    1. Martin Biewen & Miriam Sturm, 2021. "Why a Labour Market Boom Does Not Necessarily Bring Down Inequality: Putting Together Germany’s Inequality Puzzle," SOEPpapers on Multidisciplinary Panel Data Research 1139, DIW Berlin, The German Socio-Economic Panel (SOEP).
    2. Hutter, Christian & Klinger, Sabine & Trenkler, Carsten & Weber, Enzo, 2019. "Which factors are behind Germany's labour market upswing?," IAB Discussion Paper 201920, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. 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).
    4. 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.
    5. 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.
    6. Laun, Lisa, 2019. "In-work benefits across Europe," Working Paper Series 2019:16, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    7. 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.

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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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