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

  • John Schmitt

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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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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  1. Justin Weidner & John C. Williams, 2011. "What is the new normal unemployment rate?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue feb14.
  2. Daly, Mary C. & Hobijn, Bart & Valletta, Robert G., 2011. "The Recent Evolution of the Natural Rate of Unemployment," IZA Discussion Papers 5832, Institute for the Study of Labor (IZA).
  3. Kenworthy, Lane, 2008. "Jobs with Equality," OUP Catalogue, Oxford University Press, number 9780199550609, March.
  4. Cahuc, Pierre & Carcillo, Stéphane, 2011. "Is Short-Time Work a Good Method to Keep Unemployment Down?," IZA Discussion Papers 5430, Institute for the Study of Labor (IZA).
  5. 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.
  6. John Schmitt & Kris Warner, 2011. "Deconstructing Structural Unemployment," CEPR Reports and Issue Briefs 2011-06, Center for Economic and Policy Research (CEPR).
  7. 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).
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