Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235303 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 8933
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
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.
Subjects: 
unemployment benefits reform
search and matching
Hartz reforms
JEL: 
E24
E00
E60
Document Type: 
Working Paper
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