Were the Hartz Reforms Responsible for the Improved Performance of the German Labour Market?

Abstract

From 2005 to 2011 employment rose and unemployment rates declined considerably in Germany. This favourable development followed the labour market reforms initiated in 2003, and there has been a tendency to attribute the improved labour market performance to those reforms. Causal micro‐evaluations of the various measures, however, show hardly any effects on variables that can be related to employment. Rather, it seems that employment increased in response to a process of wage moderation that had already begun in the 1990s. It is possible that this moderation was itself partially a product of the reforms, but this needs further investigation.

Keywords: Germany, Hartz reforms, labour markets, unemployment

JEL Classification: J38, J48, J58, J64, J68