The German Labor Market Reforms and Post-Unemployment Earnings

Download or read book The German Labor Market Reforms and Post-Unemployment Earnings written by Niklas Engbom and published by International Monetary Fund. This book was released on 2015-07-17 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: In 2003–05, Germany undertook extensive labor market reforms which were followed by a large and persistent decline in unemployment. Key elements of the reforms were a drastic cut in benefits for the long-term unemployed and tighter job search and acceptance obligations. Using a large confidential data set from the German social security administration, we find that the reforms were associated with a fall in the earnings of workers returning to work from short-term unemployment relative to workers in long-term employment of about 10 percent. We interpret this as evidence that the reforms strengthened incentives to return to work but, in doing so, they adversely affected post re-entry earnings.