## Macroeconomic Evaluation of Labor Market Reform in Germany

_IMF Working Papers, February 13, 2013_

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## Bibliographic details
- Authors: Tom Krebs, Martin Scheffel
- Published: February 13, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781589062702.001

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### Authors and Publication
- By Tom Krebs, Martin Scheffel
- February 13, 2013
- IMF Working Papers, Working Paper No. 2013/042, Issue: 042, Volume: 2013
- Pages: 42
- DOI: https://doi.org/10.5089/9781589062702.001
- ISBN: 9781589062702
- ISSN: 1018-5941
- Stock No: WPIEA2013042

### Research Question and Context
- Evaluates the macroeconomic and welfare effects of the 2005 Hartz IV reform in Germany, described as a complete overhaul of the German unemployment insurance system that resulted in a significant reduction in unemployment benefits for the long-term unemployed.
- Uses an incomplete-market model with search unemployment calibrated to German data before the reform to simulate effects of Hartz IV.

### Methodology
- Model type: incomplete-market model with search unemployment.
- Calibration: calibrated to German data before the Hartz IV reform.
- Simulation: calibrated model used to simulate the effects of the Hartz IV reform.

### Key Findings and Quantitative Results
- Long-run (noncyclical) unemployment rate: reform reduced the long-run (noncyclical) unemployment rate in Germany by 1.4 percentage points.
- Welfare effects:
  - Welfare of employed households increases.
  - Welfare of unemployed households decreases even with moderate degree of risk aversion.

### Subject Areas and Keywords
- Subject: Expenditure, Human capital, Labor, Labor markets, Unemployment, Unemployment benefits, Unemployment rate
- Keywords: depreciation rate, effects of Hartz IV, Europe, hart IV, Hartz IV reform, Human capital, Labor Market Reform, Labor markets, macroeconomics shock, output-unemployment elasticity, production function, Unemployment, unemployment benefit system, Unemployment benefits, unemployment effect, Unemployment rate, unemployment reduction, Welfare, WP

### Access and Formats
- Available on IMF eLibrary in multiple formats.
- Citation example (Chicago): Tom Krebs, and Martin Scheffel. "Macroeconomic Evaluation of Labor Market Reform in Germany", IMF Working Papers 2013, 042 (2013), accessed 9/16/2026, https://doi.org/10.5089/9781589062702.001

*Italic: Content derived from "Macroeconomic Evaluation of Labor Market Reform in Germany", IMF Working Papers (2013/042).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/macroeconomic-evaluation-of-labor-market-reform-in-germany-40318_