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

University of St. Gallen Economics Discussion Paper No. 2005-06

68 Pages Posted: 26 Apr 2005

See all articles by Conny Wunsch

Conny Wunsch

University of Basel; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); University of St. Gallen

Date Written: March 2005

Abstract

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.

Keywords: Labour market policy, unemployment, Germany

JEL Classification: J68

Suggested Citation

Wunsch, Conny, Labour Market Policy in Germany: Institutions, Instruments and Reforms Since Unification (March 2005). University of St. Gallen Economics Discussion Paper No. 2005-06, Available at SSRN: https://ssrn.com/abstract=707422 or http://dx.doi.org/10.2139/ssrn.707422

Conny Wunsch (Contact Author)

University of Basel ( email )

Petersplatz 1
Basel, CH-4003
Switzerland

IZA Institute of Labor Economics ( email )

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

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

University of St. Gallen ( email )

Dufourstrasse 50
St. Gallen, 9000
Switzerland

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