Hartz IV and the Decline of German Unemployment: A Macroeconomic Evaluation

Brigitte Hochmuth, Britta Kohlbrecher, Christian Merkl and Hermann Gartner
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Brigitte Hochmuth: Friedrich-Alexander University of Erlangen-Nürnberg (FAU) and Institute for Advanced Studies Vienna, Austria (IHS)

No 31, IHS Working Paper Series from Institute for Advanced Studies

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 nearly 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)
Pages: 49 pages
Date: 2021-03
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 (26)

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https://irihs.ihs.ac.at/id/eprint/5705/ First version, 2021 (application/pdf)

Related works:
Journal Article: 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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