Before and after the Hartz Reforms: The Performance of Active Labour Market Policy in Germany

32 Pages Posted: 8 May 2006

See all articles by Lena Jacobi

Lena Jacobi

Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Jochen Kluve

RWI; Humboldt University of Berlin; IZA

Date Written: April 2006


Having faced high unemployment rates for more than a decade, the German government implemented a comprehensive set of labour market reforms during the period 2003-2005. This paper describes the economic and institutional context of the German labour market before and after these so-called Hartz reforms. Focussing on active policy measures, we delineate the rationale for reform and its main principles. As results of programme evaluation studies post-reform have become available just now, we give a first assessment of the effectiveness of key elements of German ALMP before and after the Hartz reforms. The evidence indicates that the re-organisation of public employment services was mainly successful, with the exception of the outsourcing of services. Re-designing training programmes seems to have improved their effectiveness, while job creation schemes continue to be detrimental for participants' employment prospects. Wage subsidies and startup subsidies show significantly positive effects. On balance, therefore, the reform seems to be moving the German labour market in the right direction.

Keywords: Active Labour Market Policy, labour market reform, programme evaluation

JEL Classification: J0, J68, J88

Suggested Citation

Jacobi, Lena and Kluve, Jochen and Kluve, Jochen, Before and after the Hartz Reforms: The Performance of Active Labour Market Policy in Germany (April 2006). IZA Discussion Paper No. 2100, RWI Discussion Paper No. 41, Available at SSRN: or

Lena Jacobi (Contact Author)

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128


Jochen Kluve

Humboldt University of Berlin ( email )

Spandauer Str. 1
Berlin, D-10099

RWI ( email )



P.O. Box 7240
Bonn, D-53072

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