The German Labor Market Reforms and Post-Unemployment Earnings

By Niklas Engbom, Enrica Detragiache, Faezeh Raei

July 17, 2015

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Niklas Engbom, Enrica Detragiache, and Faezeh Raei. The German Labor Market Reforms and Post-Unemployment Earnings, (USA: International Monetary Fund, 2015) accessed December 3, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In 2003–05, Germany undertook extensive labor market reforms which were followed by a large and persistent decline in unemployment. Key elements of the reforms were a drastic cut in benefits for the long-term unemployed and tighter job search and acceptance obligations. Using a large confidential data set from the German social security administration, we find that the reforms were associated with a fall in the earnings of workers returning to work from short-term unemployment relative to workers in long-term employment of about 10 percent. We interpret this as evidence that the reforms strengthened incentives to return to work but, in doing so, they adversely affected post re-entry earnings.

Subject: Employment, Expenditure, Labor, Labor markets, Unemployment, Unemployment benefits, Wages

Keywords: Difference-in-difference earnings regression, Displaced worker, Earnings worker, Eastern Europe, Education worker, Employment, Employment status, Europe, Germany, Growth change, Hartz reform, Labor market reforms, Post displacement, Post unemployment, Re-entry earnings, Reservation wage, Robustness earnings regression, Unemployment, Unemployment benefits, Unemployment insurance, Wages, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/162
Stock No:

WPIEA2015162
ISBN:

9781513531250
ISSN:

1018-5941

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