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What hides behind the German labor market miracle? Unemployment insurance reforms and labor market dynamics

Author

Listed:
  • Moritz Kuhn

    (University of Bonn)

  • Benjamin Hartung

    (University of Bonn)

  • Philip Jung

    (TU Dortmund)

Abstract

A key question in labor market research is how the unemployment insurance system affects unemployment rates and labor market dynamics. We revisit this old question studying the German Hartz reforms. On average, lower separation rates explain 76% of declining unemployment after the reform, a fact unexplained by existing research focusing on job finding rates. The reduction in separation rates is heterogeneous, with long-term employed, high-wage workers being most affected. We causally link our empirical findings to the reduction in long-term unemployment benefits using a heterogeneous-agent labor market search model. Absent the reform, unemployment rates would be 50% higher today.

Suggested Citation

  • Moritz Kuhn & Benjamin Hartung & Philip Jung, 2019. "What hides behind the German labor market miracle? Unemployment insurance reforms and labor market dynamics," 2019 Meeting Papers 284, Society for Economic Dynamics.
  • Handle: RePEc:red:sed019:284
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
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    4. Seele, Stefanie & Burda, Michael, 2016. "No Role for the Hartz Reforms? Demand and Supply Factors in the German Labor Market, 1993-2014," Annual Conference 2016 (Augsburg): Demographic Change 145650, Verein für Socialpolitik / German Economic Association.
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    Cited by:

    1. Jäger, Simon & Schoefer, Benjamin & Zweimüller, Josef, 2019. "Marginal Jobs and Job Surplus: A Test of the Efficiency of Separations," IZA Discussion Papers 12127, Institute of Labor Economics (IZA).
    2. Simon Jäger & Benjamin Schoefer & Josef Zweimüller, 2018. "Marginal jobs and job surplus: a test of the efficiency of separations," ECON - Working Papers 314, Department of Economics - University of Zurich.
    3. repec:ces:ifosdt:v:72:y:2019:i:06:p:03-25 is not listed on IDEAS

    More about this item

    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
    • 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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