German and European Unemployment during the Great Recession

• Applicant: Professor Dr. Andrey Launov
• Subject Area: Statistics and Econometrics ; Economic Policy, Applied Economics
• Term: from 2013 to 2016
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 242224335

This project proposes a structural econometric evaluation of the role which working time accounts and unemployment benefit reforms have played in keeping German unemployment low (and decreasing) during the Great Recession of 2008-09. The project is undertaken in three important steps. First, it provides a comprehensive econometric analysis of the workflows patterns before and after the crises. The result of this analysis is a set of stylized facts on the behaviour of the German labour market that helps to construct the appropriate structural evaluation framework. Second, it proposes an estimable theoretical model which describes the optimal individual job search behaviour and the dynamics of the aggregate unemployment under the macroeconomic shocks pertinent to the crises of 2008. Within this model optimal response to the worldwide financial crises explicitly conditions on the existing unemployment compensation scheme and the possibility of adjusting supply of working hours via working time accounts. Third, using structural estimation, it offers a complete quantification of the contribution of flexible working time accounts and the pre-crises unemployment benefit reform to the post-crises reduction of unemployment. It analyses the effectiveness of each policy tool and formulates policy advice on more efficient management of unemployment compensation scheme and working time accounts in the recessions to come. Finally the project instructs on the extent to which German experience with both policy tools can be helpful for other European labour markets under similar macroeconomic conditions. The project contributes on a large scale to the German and international academic literature on the evaluation of policy measures aimed at harnessing unemployment during the last worldwide recession. It involves intensive international cooperation with leading researchers in the field of European unemployment and occupies a strong position on the cutting edge between theory and practice.

• DFG Programme: Research Grants
• Participating Persons: Professor Dr. Thorsten Schrank; Professor Dr. Klaus Wälde