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

Arbeitspapier

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

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IHS Working Paper ; No. 31

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Macroeconomics and Monetary Economics: General ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
• Subject: Unemployment benefits reform ; search and matching ; Hartz reforms

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hochmuth, Brigitte ; Kohlbrecher, Britta ; Merkl, Christian ; Gartner, Hermann
• Event: Veröffentlichung
• (who): Institut für Höhere Studien - Institute for Advanced Studies (IHS)
• (where): Vienna
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/232038
• Last update: 10.03.2025, 11:42 AM CET