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Labor market reforms: An evaluation of the Hartz policies in Germany

Kügler, A; Bradley, J; (2019) Labor market reforms: An evaluation of the Hartz policies in Germany. European Economic Review , 113 pp. 108-135. 10.1016/j.euroecorev.2018.12.008. Green open access

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Abstract

How do workers and firms respond to comprehensive labor market reforms? We use detailed micro data to analyze the German Hartz Reforms through the lens of a structural model of the labor market. These reforms aimed at reducing unemployment, by increasing working hour flexibility, job matching and work incentives. In our setting, reforms directly affect the model parameters, which are estimated using matched data on 430,000 workers in 340,000 firms. Contrary to previous findings, our analysis shows that, although the reforms shortened the typical duration of unemployment, they did not reduce unemployment as a whole and led to a decline in wages. Low-skilled workers suffered the most in terms of employment and wage losses. Furthermore, we decompose the contribution of each reform wave to employment and wage changes, finding that the reduction in generosity of unemployment benefits was the principle driver in reducing wages.

Type: Article
Title: Labor market reforms: An evaluation of the Hartz policies in Germany
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.euroecorev.2018.12.008
Publisher version: https://doi.org/10.1016/j.euroecorev.2018.12.008
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Labor market policy, Hartz reforms, Job search, Wages, Employment
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10069841
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