Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129542
Authors: 
Krebs, Tom
Scheffel, Martin
Year of Publication: 
2012
Series/Report no.: 
Working Paper Series, Department of Economics, University of Mannheim 12-23
Abstract: 
In 2005 the German government implemented the so-called Hartz IV reform, which amounted to a complete overhaul of the German unemployment insurance system and resulted in a significant reduction in unemployment benefits for the long-term unemployed. In this paper, we use an incomplete-market model with search unemployment to evaluate the macro-economic and welfare effects of the Hartz IV reform. We calibrate the model economy to German data before the reform and then use the calibrated model economy to simulate the effects of Hartz IV. In our baseline calibration, we find that the reform has reduced the long-run (noncyclical)unemployment rate in Germany by 1.4 percentage points. We also find that the welfare of employed households increases, but the welfare of unemployed households decreases even with moderate degree of risk aversion.
Subjects: 
Labor Market Reform
Unemployment
Welfare
JEL: 
E21
E24
D52
J24
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
199.15 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.