The German labour market reforms in a European context: A DSGE analysis

Claudia Busl and Atılım Seymen
Authors registered in the RePEc Author Service: Claudia Fries, geb. Busl

No 13-097, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: While a widespread consensus exists among macroeconomists that the German labour market reforms in 2003-2005 have successfully contributed to the decline of the unemployment rate, critics claim that the reforms led to wage restraint and consequently consumption dampening accompanied by beggar-thy-neighbour effects, harming Germany's trade partners. We check up on the validity of these arguments by means of a two-country DSGE model featuring intra-industry trade and labour market frictions. Our results suggest that the disproportional growth of GDP (labour productivity) in comparison to consumption (wages) are only partially driven by the reforms. However, we do not find that the reforms contribute to Germany's trade surplus and cause negative spillovers to trading partners in terms of output and employment.

Keywords: labour market reforms; search and matching; spillover; dynamic stochastic general equilibrium models (search for similar items in EconPapers)
JEL-codes: E24 E61 E65 F42 J38 J63 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-dge, nep-eec, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:13097

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