What Explains the German Labor Market Miracle in the Great Recession?

Michael Burda and Jennifer Hunt

No 5800, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Germany experienced an even deeper fall in GDP in the Great Recession than the United States, with little employment loss. Employers' reticence to hire in the preceding expansion, associated in part with a lack of confidence it would last, contributed to an employment shortfall equivalent to 40 percent of the missing employment decline in the recession. Another 20 percent may be explained by wage moderation. A third important element was the widespread adoption of working time accounts, which permit employers to avoid overtime pay if hours per worker average to standard hours over a window of time. We find that this provided disincentives for employers to lay off workers in the downturn. Although the overall cuts in hours per worker were consistent with the severity of the Great Recession, reduction of working time account balances substituted for traditional government-sponsored short-time work.

Keywords: Hartz reforms; working time accounts; short time work; Great Recession; Germany; unemployment; extensive vs. intensive employment margin (search for similar items in EconPapers)
JEL-codes: E24 E32 J6 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2011-06
New Economics Papers: this item is included in nep-lab, nep-ltv and nep-mac
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Citations: View citations in EconPapers (410)

Published - published in: Brookings Papers on Economic Activity, 2011, Spring 2011, 273 - 319

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Journal Article: What Explains the German Labor Market Miracle in the Great Recession (2011)
Working Paper: What Explains the German Labor Market Miracle in the Great Recession? (2011)
Working Paper: What Explains the German Labor Market Miracle in the Great Recession? (2011)
Working Paper: What explains the German labor market miracle in the Great Recession? (2011)
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