Hartz IV and the decline of German unemployment: A macroeconomic evaluation

Brigitte Hochmuth, Britta Kohlbrecher, Christian Merkl and Hermann Gartner

Journal of Economic Dynamics and Control, 2021, vol. 127, issue C

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 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 of equal importance. In addition, we provide direct empirical evidence on labor selection, one potential dimension of recruiting intensity.

Keywords: Unemployment benefits reform; Search and matching; Hartz reforms (search for similar items in EconPapers)
JEL-codes: E00 E24 E60 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Related works:
Working Paper: Hartz IV and the Decline of German Unemployment: A Macroeconomic Evaluation (2021)
Working Paper: Hartz IV and the Decline of German Unemployment: A Macroeconomic Evaluation (2021)
Working Paper: Hartz IV and the decline of German unemployment: A macroeconomic evaluation (2021)
Working Paper: Hartz IV and the decline of German unemployment: A macroeconomic evaluation (2019)
Working Paper: Hartz IV and the Decline of German Unemployment: A Macroeconomic Evaluation (2019)
Working Paper: Hartz IV and the Decline of German Unemployment: A Macroeconomic Evaluation (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:127:y:2021:i:c:s016518892100049x

DOI: 10.1016/j.jedc.2021.104114

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