The Fall in German Unemployment: A Flow Analysis

50 Pages Posted: 12 Apr 2018

See all articles by Carlos Carrillo-Tudela

Carlos Carrillo-Tudela

University of Leicester; IZA Institute of Labor Economics

Andrey Launov

University of Wuerzburg; IZA Institute of Labor Economics

Jean-Marc Robin

École Normale Supérieure (ENS) - Laboratoire d'Economie Theorique et Appliquee (LEA); National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); French National Institute for Agricultural Research (INRA); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

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Abstract

In this paper we investigate the recent fall in unemployment, and the rise in part-time work, labour market participation, inequality and welfare in Germany. Unemployment fell because the Hartz IV reform induced a large fraction of the long-term unemployed to deregister as jobseekers and appear as non-participants. Yet, labour force participation increased because many unregistered-unemployed workers ended up accepting low-paid part-time work that was offered in quantity in absence of a universal minimum wage. A large part of the rise in part-time work was also due to the tax benefits Hartz II introduced to take up a mini-job as secondary employment. This has provided an easy way to top-up labour income staggering under the pressure of wage moderation. The rise in part-time work led to an increase in inequality at the lower end of income distribution. Overall we find that Germany increased welfare as unemployment fell.

Keywords: unemployment, part-time work, mini-jobs, non-participation, multiple job holding, income inequality, Germany, Hartz reforms

JEL Classification: J21, J31, J63, J64

Suggested Citation

Carrillo-Tudela, Carlos and Launov, Andrey and Robin, Jean-Marc, The Fall in German Unemployment: A Flow Analysis. IZA Discussion Paper No. 11442, Available at SSRN: https://ssrn.com/abstract=3158148

Carlos Carrillo-Tudela (Contact Author)

University of Leicester ( email )

University Road
Leicester, LE1 7RH
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IZA Institute of Labor Economics

P.O. Box 7240
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Germany

Andrey Launov

University of Wuerzburg ( email )

Sanderring 2
Würzburg, D-97070
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Jean-Marc Robin

École Normale Supérieure (ENS) - Laboratoire d'Economie Theorique et Appliquee (LEA) ( email )

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National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

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Malakoff Cedex, 1 92245
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French National Institute for Agricultural Research (INRA)

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Paris Cedex 07, 78-Yvelines 75338
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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