[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp9787.html
   My bibliography  Save this paper

Structural Reform in Germany

Author

Listed:
  • Krebs, Tom

    (University of Mannheim)

  • Scheffel, Martin

    (University of Cologne)

Abstract
This paper provides a quantitative evaluation of the macroeconomic, distributional, and fiscal effects of three reform proposals for Germany: i) a reduction in the social security tax in the low-wage sector, ii) a publicly financed expansion of full-day child care and full-day schooling, and iii) the further deregulation of the professional service sector. The analysis is based on a macroeconomic model with physical capital, human capital, job search, and household heterogeneity. All three reforms have positive short-run and long-run effects on employment, wages, and output. The quantitative effects of the deregulation reform are relatively small due to the small size of the professional services in Germany. Policy reforms i) and ii) have substantial macroeconomic effects and positive distributional consequences. Ten years after implementation, reforms i) and ii) taken together increase employment by 1.6 percent, potential output by 1.5 percent, real hourly pre-tax wages in the low-wage sector by 3 percent, and real hourly pre-tax wages of women with children by 2.7 percent. The two reforms create fiscal deficits in the short-run, but they also generate substantial fiscal surpluses in the long-run. They are fiscally efficient in the sense that the present value of short-term fiscal deficits and long-term fiscal surpluses is positive for any interest (discount) rate less than 9 percent.

Suggested Citation

  • Krebs, Tom & Scheffel, Martin, 2016. "Structural Reform in Germany," IZA Discussion Papers 9787, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9787
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp9787.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. International Monetary Fund, 2014. "Bhutan: Staff Report for the 2014 Article IV Consultation," IMF Staff Country Reports 2014/178, International Monetary Fund.
    2. Mueller, Andreas, 2010. "On-the-job search and wage dispersion: New evidence from time use data," Economics Letters, Elsevier, vol. 109(2), pages 124-127, November.
    3. International Monetary Fund, 2014. "Sweden: Staff Report for the 2014 Article IV Consultation," IMF Staff Country Reports 2014/261, International Monetary Fund.
    4. David Card & Andrew Johnston & Pauline Leung & Alexandre Mas & Zhuan Pei, 2015. "The Effect of Unemployment Benefits on the Duration of Unemployment Insurance Receipt: New Evidence from a Regression Kink Design in Missouri, 2003-2013," American Economic Review, American Economic Association, vol. 105(5), pages 126-130, May.
    5. Hunt, Jennifer, 1995. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Journal of Labor Economics, University of Chicago Press, vol. 13(1), pages 88-120, January.
    6. International Monetary Fund, 2014. "Denmark: Staff Report for the 2014 Article IV Consultation," IMF Staff Country Reports 2014/331, International Monetary Fund.
    7. Mr. Tom Krebs & Mr. Martin Scheffel, 2013. "Macroeconomic Evaluation of Labor Market Reform in Germany," IMF Working Papers 2013/042, International Monetary Fund.
    8. Robert Shimer & Ivan Werning, 2008. "Liquidity and Insurance for the Unemployed," American Economic Review, American Economic Association, vol. 98(5), pages 1922-1942, December.
    9. Rasmus Lentz, 2009. "Optimal Unemployment Insurance in an Estimated Job Search Model with Savings," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 37-57, January.
    10. International Monetary Fund, 2014. "Kingdom of the Netherlands—Netherlands: Staff Report for the 2014 Article IV Consultation," IMF Staff Country Reports 2014/327, International Monetary Fund.
    11. Alan Manning & Barbara Petrongolo, 2008. "The Part-Time Pay Penalty for Women in Britain," Economic Journal, Royal Economic Society, vol. 118(526), pages 28-51, February.
    12. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
    13. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-782, July.
    14. Kai-Uwe Müller & Viktor Steiner, 2008. "Imposed Benefit Sanctions and the Unemployment-to-Employment Transition: The German Experience," Discussion Papers of DIW Berlin 792, DIW Berlin, German Institute for Economic Research.
    15. International Monetary Fund, 2014. "Republic of Latvia: Staff Report for the 2014 Article IV Consultation," IMF Staff Country Reports 2014/115, International Monetary Fund.
    16. Krueger, Alan B. & Mueller, Andreas, 2010. "Job search and unemployment insurance: New evidence from time use data," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 298-307, April.
    17. Raj Chetty, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 173-234, April.
    18. Krebs, Tom & Yao, Yao, 2016. "Labor Market Risk in Germany," IZA Discussion Papers 9869, Institute of Labor Economics (IZA).
    19. Tom Krebs & Martin Scheffel, 2013. "Macroeconomic Evaluation of Labor Market Reform in Germany," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(4), pages 664-701, December.
    20. Barry T. Hirsch, 2005. "Why Do Part-Time Workers Earn Less? The Role of Worker and Job Skills," ILR Review, Cornell University, ILR School, vol. 58(4), pages 525-551, July.
    21. Hopenhayn, Hugo A & Nicolini, Juan Pablo, 1997. "Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 412-438, April.
    22. Caliendo, Marco & Künn, Steffen & Uhlendorff, Arne, 2012. "Marginal Employment, Unemployment Duration and Job Match Quality," IZA Discussion Papers 6499, Institute of Labor Economics (IZA).
    23. Müller, Kai-Uwe & Steiner, Viktor, 2008. "Imposed Benefit Sanctions and the Unemployment-to-Employment Transition: The German Experience," IZA Discussion Papers 3483, Institute of Labor Economics (IZA).
    24. Raj Chetty, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 173-234, April.
    25. International Monetary Fund, 2014. "Nepal: Staff Report for the 2014 Article IV Consultation," IMF Staff Country Reports 2014/214, International Monetary Fund.
    26. John F. Ermisch & Robert E. Wright, 1993. "Wage Offers and Full-Time and Part-Time Employment by British Women," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 111-133.
    27. Krause, Michael U. & Uhlig, Harald, 2012. "Transitions in the German labor market: Structure and crisis," Journal of Monetary Economics, Elsevier, vol. 59(1), pages 64-79.
    28. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392, Elsevier.
    29. Eichhorst, Werner & Hinz, Tina & Marx, Paul & Peichl, Andreas & Pestel, Nico & Siegloch, Sebastian & Thode, Eric & Tobsch, Verena, 2012. "Geringfügige Beschäftigung: Situation und Gestaltungsoptionen," IZA Research Reports 47, Institute of Labor Economics (IZA).
    30. Tom Krebs, 2003. "Human Capital Risk and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 709-744.
    31. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
    32. Raj Chetty, 2008. "Moral Hazard vs. Liquidity and Optimal Unemployment Insurance," NBER Working Papers 13967, National Bureau of Economic Research, Inc.
    33. Ethel B. Jones & James E. Long, 1979. "Part-Week Work and Human Capital Investment by Married Women," Journal of Human Resources, University of Wisconsin Press, vol. 14(4), pages 579-594.
    34. Hofmann Barbara, 2012. "Short- and Long-term Ex-Post Effects of Unemployment Insurance Sanctions: Evidence from West Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 232(1), pages 31-60, February.
    35. International Monetary Fund, 2014. "Germany: Staff Report for the 2014 Article IV Consultation," IMF Staff Country Reports 2014/216, International Monetary Fund.
    36. International Monetary Fund, 2014. "Tonga: Staff Report for the 2014 Article IV Consultation," IMF Staff Country Reports 2014/240, International Monetary Fund.
    37. International Monetary Fund, 2014. "Vietnam: Staff Report for the 2014 Article IV Consultation," IMF Staff Country Reports 2014/311, International Monetary Fund.
    38. Wolf, Elke, 2010. "Lohndifferenziale zwischen Vollzeit- und Teilzeitbeschäftigten in Ost- und Westdeutschland," WSI Working Papers 174, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    39. International Monetary Fund, 2014. "Spain: Staff Report for the 2014 Article IV Consultation," IMF Staff Country Reports 2014/192, International Monetary Fund.
    40. Tom Krebs & Martin Scheffel, 2013. "Macroeconomic Evaluation of Labor Market Reform in Germany," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(4), pages 664-701, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Krebs, Tom & Scheffel, Martin, 2016. "Quantifizierung der gesamtwirtschaftlichen und fiskalischen Effekte ausgewählter Infrastruktur- und Bildungsinvestitionen in Deutschland," Working Papers 16-13, University of Mannheim, Department of Economics.
    2. Feld, Lars P. & Schmidt, Christoph M. & Schnabel, Isabel & Truger, Achim & Wieland, Volker, 2019. "Den Strukturwandel meistern. Jahresgutachten 2019/20 [Dealing with Structural Change. Annual Report 2019/20]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201920, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mr. Tom Krebs & Mr. Martin Scheffel, 2016. "Structural Reform in Germany," IMF Working Papers 2016/096, International Monetary Fund.
    2. Krebs, Tom & Scheffel, Martin, 2016. "Quantifizierung der gesamtwirtschaftlichen Effekte ausgewählter Reformvorschläge der Studie "Reforms, Investment and Growth: An Agenda for France, Germany and Europe"," Working Papers 16-04, University of Mannheim, Department of Economics.
    3. Tom Krebs & Martin Scheffel, 2016. "Labor Market Institutions and the Cost of Recessions," CESifo Working Paper Series 6262, CESifo.
    4. Tom Krebs, 2014. "Labor Market Reform and the Cost of Business Cycles," 2014 Meeting Papers 1017, Society for Economic Dynamics.
    5. Tom Krebs & Martin Scheffel, 2013. "Macroeconomic Evaluation of Labor Market Reform in Germany," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(4), pages 664-701, December.
    6. Konstantinos Tatsiramos & Jan C. Ours, 2014. "Labor Market Effects Of Unemployment Insurance Design," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 284-311, April.
    7. Salim Araji & Vladimir Hlasny & Layal Mansour Ichrakieh & Vito Intini, 2019. "Targeting debt in Lebanon: a structural macro-econometric model," Middle East Development Journal, Taylor & Francis Journals, vol. 11(1), pages 75-104, January.
    8. Saungweme Talknice & Odhiambo Nicholas M., 2021. "Public debt and inflation dynamics: Empirical evidence from Zimbabwe," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 7(2), pages 14-30, December.
    9. Tanaka, Sakiko & Spohr, Christopher & D’Amico, Sandra, 2015. "Myanmar Human Capital Development, Employment, and Labor Markets," ADB Economics Working Paper Series 469, Asian Development Bank.
    10. Johannes F. Schmieder & Till von Wachter, 2016. "The Effects of Unemployment Insurance Benefits: New Evidence and Interpretation," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 547-581, October.
    11. Susan Ariel Aaronson, 2016. "Repression, Civil Conflict, and Leadership Tenure: The Sri Lanka Case Study," Working Papers 2016-9, The George Washington University, Institute for International Economic Policy.
    12. Abbott, Pamela & Sapsford, Roger & Binagwaho, Agnes, 2017. "Learning from Success: How Rwanda Achieved the Millennium Development Goals for Health," World Development, Elsevier, vol. 92(C), pages 103-116.
    13. Spinnewijn, Johannes, 2013. "Training and search during unemployment," Journal of Public Economics, Elsevier, vol. 99(C), pages 49-65.
    14. Gilberto M. Llanto, 2016. "Philippine Infrastructure and Connectivity: Challenges and Reforms," Asian Economic Policy Review, Japan Center for Economic Research, vol. 11(2), pages 243-261, July.
    15. Mariana Colacelli & Emilio Fernández Corugedo, 2018. "Macroeconomic Effects of Japan’s Demographics: Can Structural Reforms Reverse Them?," IMF Working Papers 2018/248, International Monetary Fund.
    16. Ricardo Hausmann & Tim O'Brien & Miguel Angel Santos & Ana Grisanti & Jorge Tapia, 2019. "Jordan: The Elements of a Growth Strategy," Growth Lab Working Papers 131, Harvard's Growth Lab.
    17. Borislava Mircheva & Mr. Dirk V Muir, 2015. "Spillovers in the Nordic Countries," IMF Working Papers 2015/070, International Monetary Fund.
    18. Saungweme, Talknice & Odhiambo, Nicholas M., 2020. "The Impact of Domestic and Foreign Public Debt on Economic Growth: Empirical Evidence from Zimbabwe," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(1), pages 77-106.
    19. Paul Mosley & Blessing Chiripanhura, 2016. "The African Political Business Cycle: Varieties of Experience," Journal of Development Studies, Taylor & Francis Journals, vol. 52(7), pages 917-932, July.
    20. Salim M. Darbar & Xiaoyong Wu, 2016. "Experiences with Macroprudential Policy — Five Case Studies," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(03), pages 1-34, October.

    More about this item

    Keywords

    structural reform; Germany;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp9787. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.