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Explaining the German Employment Miracle in the Great Recession – The Crucial Role of Temporary Working Time Reductions

Author

Listed:
  • Alexander Herzog-Stein
  • Fabian Lindner
  • Simon Sturn

Abstract

This paper investigates the reasons for the exceptionally robust performance of the German labour market during the Great Recession. While GDP dropped by more than five per cent in 2009, employment remained constant and started to increase soon after. We compare this recession to other major recessions in Germany and analyse to what extent changes in hourly productivity and working time cushioned their impact on employment. We find that reductions in hourly productivity played a significant role in all recessions while working time reductions helped to safeguard jobs only occasionally. However, in the Great Recession, temporary working time reductions were amply used to stabilise employment. Using a time series model, we show that the reduction in hourly productivity during the Great Recession is predictable with historical data, while the reduction in working time was unexpectedly pronounced. Using detailed information on instruments for the adjustment of working hours, we show that new instruments which have been established in the decade before the Great Recession have been heavily used to reduce working time in the Great Recession. We argue that the development of these instruments was only possible within the framework of corporatist industrial relations.

Suggested Citation

  • Alexander Herzog-Stein & Fabian Lindner & Simon Sturn, 2013. "Explaining the German Employment Miracle in the Great Recession – The Crucial Role of Temporary Working Time Reductions," IMK Working Paper 114-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  • Handle: RePEc:imk:wpaper:114-2013
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    File URL: http://www.boeckler.de/pdf/p_imk_wp_114_2013.pdf
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    References listed on IDEAS

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    1. Jens Boysen-Hogrefe & Dominik Groll, 2010. "The German Labour Market Miracle," National Institute Economic Review, National Institute of Economic and Social Research, vol. 214(1), pages 38-50, October.
    2. Karl BRENKE & Ulf RINNE & Klaus F. ZIMMERMANN, 2013. "Short-time work: The German answer to the Great Recession," International Labour Review, International Labour Organization, vol. 152(2), pages 287-305, June.
    3. Michael C. Burda & Jennifer Hunt, 2011. "What Explains the German Labor Market Miracle in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 273-335.
    4. repec:zbw:iwhwiw:8-10-5 is not listed on IDEAS
    5. Zapf, Ines, 2012. "Flexibilität am Arbeitsmarkt durch Überstunden und Arbeitszeitkonten : Messkonzepte, Datenquellen und Ergebnisse im Kontext der IAB-Arbeitszeitrechnung," IAB-Forschungsbericht 201203, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Herzog-Stein, Alexander & Seifert, Hartmut, 2009. "Deutsches "Beschäftigungswunder" und flexible Arbeitszeiten," WSI Working Papers 169, The Institute of Economic and Social Research (WSI), Hans-Böckler-Foundation.
    7. Eichhorst, Werner & Marx, Paul & Tobsch, Verena, 2009. "Institutional Arrangements, Employment Performance and the Quality of Work," IZA Discussion Papers 4595, Institute for the Study of Labor (IZA).
    8. Roed, Knut, 1997. " Hysteresis in Unemployment," Journal of Economic Surveys, Wiley Blackwell, vol. 11(4), pages 389-418, December.
    9. Brautzsch, Hans-Ulrich & Will, K. H., 2010. "Kurzarbeit: Wichtige Stütze des Arbeitsmarktes in der Krise, aber keine Dauerlösung," Wirtschaft im Wandel, Halle Institute for Economic Research (IWH), vol. 16(8), pages 376-383.
    10. Simon STURN, 2013. "Are corporatist labour markets different? Labour market regimes and unemployment in OECD countries," International Labour Review, International Labour Organization, vol. 152(2), pages 237-254, June.
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    Citations

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    Cited by:

    1. Klara Zwickl & Franziska Disslbacher & Sigrid Stagl, 2015. "Work-sharing for a sustainable economy," Ecological Economics Papers ieep4, Institute of Ecological Economics.
    2. Zwickl, Klara & Disslbacher, Franziska & Stagl, Sigrid, 2016. "Work-sharing for a sustainable economy," Ecological Economics, Elsevier, vol. 121(C), pages 246-253.
    3. Zwickl, Klara & Disslbacher, Franziska & Stagl, Sigrid, 2015. "Work-sharing for a sustainable economy," Ecological Economic Papers 4564, WU Vienna University of Economics and Business.
    4. repec:wfo:wstudy:58684 is not listed on IDEAS
    5. Alexander Herzog-Stein & Fabian Lindner & Rudolf Zwiener, 2013. "Is the supply side all that counts?," IMK Report 87e-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    6. Holtemöller, Oliver & Brautzsch, Hans-Ulrich & Drechsel, Katja & Drygalla, Andrej & Giesen, Sebastian & Hennecke, Peter & Kiesel, Konstantin & Loose, Brigitte & Meier, Carsten-Patrick & Zeddies, Götz, 2015. "Ökonomische Wirksamkeit der Konjunktur stützenden finanzpolitischen Maßnahmen der Jahre 2008 und 2009. Forschungsvorhaben im Auftrag des Bundesministeriums der Finanzen," IWH Online 4/2015, Halle Institute for Economic Research (IWH).
    7. Alexander Herzog-Stein & Fabian Lindner & Rudolf Zwiener, 2013. "Nur das Angebot zählt?," IMK Report 87-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    8. Simon STURN, 2013. "Are corporatist labour markets different? Labour market regimes and unemployment in OECD countries," International Labour Review, International Labour Organization, vol. 152(2), pages 237-254, June.
    9. Klara Zwickl & Franziska Disslbacher & Sigrid Stagl, 2016. "Work-sharing for a sustainable economy," WWWforEurope Working Papers series 111, WWWforEurope.

    More about this item

    Keywords

    Germany; Great Recession; employment miracle; working time reduction; labour hoarding; internal labour market flexibility; working time accounts; short time work;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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