Veranstaltung am

Christian Merkl (FAU Nürnberg)

Host: Thomas Steger

Abstract: Lower unemployment benefits increase firms’ incentives to post vacancies due to lower wages, but reduce workers’ insurance against unemployment. Under incomplete insurance, this stimulates precautionary savings and reduces the equilibrium interest rate. We analyze the consequences of a benefit reform under incomplete asset markets in a two-country model. The increase in precautionary savings in the reforming country leads to a permanently higher debt level in the non-reforming country and increased debt service. We discipline our quantitative model to the estimated reaction of the tradable versus the non-tradable sector in the aftermath of the German Hartz reforms and analyze the implications
in the European Monetary Union. The calibrated version of the model generates substantial negative long-run consumption spillovers, which we call the dark shadow of labor market reforms.

Zeit: Mittwoch, 17:00 Uhr
Ort: Fakultätsratsraum (I 117), Institutsgebäude, Grimmaische Str. 12, 04109 Leipzig
Organisation: Economics Department
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