Publication

This paper investigates the macroeconomic effects of structural labor market reforms in Germany. The authors find that neither the fact that Germany can no longer pursue an independent monetary policy nor the possibility that other countries in the euro area might react to reforms in Germany by implementing labor market reforms themselves constitute impediments to successful reforms. Reforms would relative quickly bring down unemployment and increase gross domestic product significantly. The authors conclude that even former labor market 'insiders' would gain a net wages increase due to falling unemployment insurance contributions.