Transitions in the German Labor Market: Structure and Crisis

60 Pages Posted: 8 Jun 2016

See all articles by Michael U. Krause

Michael U. Krause

University of Cologne

Harald Uhlig

University of Chicago - Department of Economics

Date Written: 2011

Abstract

Since the so-called Hartz IV reforms around 2005 and during the global crisis of 2008/2009, the German labor market featured mainly declining unemployment rates. We develop a search and matching model with heterogeneous skills to explore the role of structural and cyclical policies for this performance. Calibrating unemployment benefits to approximate legislation before and after the reforms, we find a large reduction in unemployment and its duration, with the transition concluding after about three years. During the crisis, the extended use of short-time labor subsidies that prevent jobs from being destroyed is likely to have prevented strong increases in unemployment.

Keywords: German Hartz IV reforms, search and matching, unemployment benefits, labor subsidies

JEL Classification: E24, E32, J64

Suggested Citation

Krause, Michael U. and Uhlig, Harald, Transitions in the German Labor Market: Structure and Crisis (2011). Bundesbank Series 1 Discussion Paper No. 2011,34. Available at SSRN: https://ssrn.com/abstract=2785451

Michael U. Krause (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Harald Uhlig

University of Chicago - Department of Economics ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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