What Explains The German Labor Market Miracle In The Great Recession?

Germany experienced an even deeper fall in GDP in the Great Recession than the United States with little employment loss. Employers' reticence to hire in the preceding expansion - associated in part with a lack of confidence it would last - contributed to an employment shortfall equivalent to 40 percent of the missing employment decline in the recession. Another 20 percent may be explained by wage moderation. A third important element was the widespread adoption of working time accounts, which permit employers to avoid overtime pay if hours per worker average to standard hours over a window. The authors find that this provided disincentives for employers to lay off workers in the downturn.

Provided by: McGill University Topic: CXO Date Added: May 2011 Format: PDF

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