Working Paper

The German Labor Market During the Great Recession: Shocks and Institutions

IAB discussion paper, 14/2017

This paper analyzes Germany’s unusual labor market experience during the Great Recession. We estimate a general equilibrium model with a detailed labor market block for post-unification Germany. This allows us to disentangle the role of institutions (short-time work, government spending rules) and shocks (aggregate, labor market, and policy shocks) and to perform counterfactual exercises. We identify positive labor market performance shocks (likely caused by labor market reforms) as the key driver for the“German labor market miracle” during the Great Recession.


Britta Gehrke
Wolfgang Lechthaler - Kiel Institute
Wolfgang Lechthaler
Christian Merkl