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Another Economic Miracle? The German Labor Market and the Great Recession

Ulf Rinne

Institute for the Study of Labor (IZA)

Klaus F. Zimmermann

Harvard University; German Institute for Economic Research (DIW Berlin); University of Bonn; Centre for Economic Policy Research (CEPR)

IZA Discussion Paper No. 6250

The mild response of the German labor market to the worst global recession in post-war history appears as an economic miracle. In response to the crisis, Germany has shown to be a strong case of internal flexibility. We argue that important factors that have contributed to this development include the strong position of the German economy due to recent labor market reforms, the nature of the crisis affecting mainly export-oriented companies in Germany, the extension of short-time work, the behavior of social partners, and automatic stabilizers. Among these factors, we emphasize the key role of the interaction between short-time work and long-term shortages of skilled workers in sectors and regions that were particularly affected by the crisis. Although the German experience is in stark contrast to that in the United States, we identify and discuss three challenges that will be at the center of debate on both sides of the Atlantic in the future.

Number of Pages in PDF File: 29

Keywords: economic crisis, Germany, short-time work, unemployment, labor market institutions, internal flexibility

JEL Classification: J68, J21, P52, O57

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Date posted: January 8, 2012  

Suggested Citation

Rinne, Ulf and Zimmermann, Klaus F., Another Economic Miracle? The German Labor Market and the Great Recession. IZA Discussion Paper No. 6250. Available at SSRN: https://ssrn.com/abstract=1981206

Contact Information

Ulf Rinne (Contact Author)
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
HOME PAGE: http://www.iza.org/profile?key=1844

Klaus F. Zimmermann
Harvard University ( email )
1875 Cambridge Street
Cambridge, MA 02138
United States
German Institute for Economic Research (DIW Berlin)
Mohrenstraße 58
Berlin, 10117
University of Bonn
Postfach 2220
Bonn, D-53012
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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