Seminar Series “Macroeconomics and Labor Markets” on 18 July 2023
We are pleased to invite you to the seminar series on “Macroeconomics and Labor Markets“ organized by the Chair of Macroeconomics at the Friedrich-Alexander University Erlangen-Nuremberg, Prof. Merkl, the Chair of Global Governance and International Trade at the Friedrich-Alexander University Erlangen-Nuremberg, Prof. Moser, and the Competence Field Macroeconomics of the Institute for Employment Research (IAB). Researchers of both institutions, as well as national and international guests, present their current work at the intersection of labor- and macroeconomics.
The next seminar will be held on Tuesday, July 18, 12 noon to 1.30 pm (German time).
This will be a hybrid seminar. People from Nürnberg can attend in room 7.06 at the IAB building (Regensburger Str. 100).
Remote participation will be possible via Skype Business. The login information will be sent a day before the seminar.
Brigitte Hochmuth (University of Vienna) will talk about
“The Dark Shadow of Benefit Reforms in the Open Economy” (joint work with Christian Merkl and Heiko Stüber).
Abstract:
This paper analyzes the open-economy spillover effects of labor market reforms under incomplete insurance. Using microeconomic data, we document a boost in the tradable sector in the aftermath of the German Hartz IV reform. In our model, this phenomenon can be explained by an increase in household savings due to higher precautionary savings in response to the reduction in the generosity of unemployment insurance (Hartz IV). Besides reducing unemployment in the reforming country, lower unemployment benefits generate long-run negative consumption spillovers in a monetary union, which we call the dark shadow of labor market reforms. Our model can match various German trends post Hartz IV reform, such as: i) a lasting increase in net foreign asset position, ii) short-term expansion of the tradable sector relative to the non-tradable sector, and iii) continued depreciation of the real exchange rate. By contrast, simulations of German wage moderation result in qualitatively different open-economy effects that are not in line with the empirical patterns for Germany.