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Hartz IV and the Decline of German Unemployment: a Macroeconomic Evaluation
[working paper]
Corporate Editor
Institut für Höhere Studien (IHS), Wien
Abstract This paper proposes a new approach to evaluate the macroeconomic effects of the "Hartz IV" reform, which reduced the generosity of long-term unemployment benefits. We propose a model with different unemployment durations, where the reform initiates both a partial effect and an equilibrium effect. We... view more
This paper proposes a new approach to evaluate the macroeconomic effects of the "Hartz IV" reform, which reduced the generosity of long-term unemployment benefits. We propose a model with different unemployment durations, where the reform initiates both a partial effect and an equilibrium effect. We estimate the relative importance of these two effects and the size of the partial effect based on the IAB Job Vacancy Survey. Our approach does not hinge on an external source for the decline in the replacement rate for long-term unemployed. We find that Hartz IV was a major driver for the decline of Germany’s steady state unemployment and that partial and equilibrium effect were nearly of equal importance. In addition, we provide direct empirical evidence on labor selection, one potential dimension of recruiting intensity.... view less
Keywords
Arbeitslosengeld; reform; Hartz-Reform; unemployment; national trade and industry; Federal Republic of Germany; unemployment compensation
Classification
Labor Market Research
Social Problems
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Document language
English
Publication Year
2021
City
Wien
Page/Pages
49 p.
Series
IHS Working Paper, 31
Status
Published Version; reviewed