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Labour Market Policy in Germany: Institutions, Instruments and Reforms since Unification

  • Conny Wunsch


Almost 15 years after Unification in 1990, Germany is still struggling with the economic consequences of this event. Although the East German economy has made considerable progress since its near-collapse after the German monetary, economic and social union in July 1990, the East German labour market has not yet recovered. Western Germany, which had to bear a substantial part of the fiscal cost of German Unification, is also faced with high unemployment though the rate is considerably lower than in the Eastern part. Expenditure for activation measures and income support during unemployment is substantial and one of the highest among OECD countries. In response to exploding cost of unemployment and continuing public pressure to solve the unemployment problem, the German Federal Government has started the largest social policy reform in the history of the Federal Republic. This paper reconstructs the development of the German labour market and the stepwise reform of German labour market policy since German Unification in 1990. It provides a detailed description of the instruments of German active labour market policy and reviews the existing econometric evidence on their effectiveness.

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Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2005 with number 2005-06.

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Length: 99 pages
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:usg:dp2005:2005-06
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  1. Frölich, Markus & Lechner, Michael & Steiger, Heidi, 2003. "Statistically assisted programme selection - International experiences and potential benefits for Switzerland," Working Paper Series 2004:1, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  2. Eichler, Martin & Lechner, Michael, 1999. "An Evaluation of Public Employment Programmes in the East German State of Sachsen-Anhalt," IZA Discussion Papers 94, Institute for the Study of Labor (IZA).
  3. Lechner, Michael, 1996. "An Evaluation of Public Sector Sponsored Continuous Vocational Training Programs in East Germany," Discussion Papers 539, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
  4. Bergemann, Annette & Fitzenberger, Bernd & Speckesser, Stefan, 2005. "Evaluating the Dynamic Employment Effects of Training Programs in East Germany Using Conditional Difference-in-Differences," IZA Discussion Papers 1848, Institute for the Study of Labor (IZA).
  5. Eckhard Wurzel, 2001. "The Economic Integration of Germany's New Länder," OECD Economics Department Working Papers 307, OECD Publishing.
  6. Wolfgang Franz & Viktor Steiner, 2000. "Wages in the East German Transition Process: Facts and Explanations," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 241-269, 08.
  7. Fitzenberger, Bernd & Prey, Hedwig, 2000. "Evaluating Public Sector Sponsored Training in East Germany," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 497-520, July.
  8. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
  9. Siebert, Horst, 1991. "The integration of Germany : Real economic adjustment," European Economic Review, Elsevier, vol. 35(2-3), pages 591-602, April.
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