What Hides Behind the German Labor Market Miracle? Unemployment Insurance Reforms and Labor Market Dynamics

A key question in labor market research is how the unemployment insurance system affects unemployment rates and labor market dynamics. We revisit this old question studying the German Hartz reforms. On average, lower separation rates explain 76% of declining unemployment after the reform, a fact unexplained by existing research focusing on job finding rates. The reduction in separation rates is heterogeneous, with long-term employed, high-wage workers being most affected. We causally link our empirical findings to the reduction in long-term unemployment benefits using a heterogeneous-agent labor market search model. Absent the reform, unemployment rates would be 50% higher today.

• Publication year

  2018

• Venue

  Social Science Research Network

• Publication date

  2018-11-01

• Fields of study

  Economics

• Identifiers
  DOI 10.2139/ssrn.3301769
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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