Germany’s Job Miracle in the World Recession—Shock-Absorbing Institutions in the Manufacturing Sector

By Joachim Möller

Abstract

This paper aims at analyzing the Germany’s so-called job miracle in the aftermath of the World Recession. The massive downturn mainly affected export-oriented manufacturing industries. These industries have shown an astonishingly moderate employment response. Hence there is strong evidence for substantial labor hoarding. By analyzing different branches of manufacturing one can shed some light on the buffering processes that took place at the firm level. It is shown that measures of within-firm flexibility—supported by labor market instruments like short-time work schemes—prevented Germany from major dismissals and a sharp increase in the unemployment rate.

Keywords: World Recession, labor market adjustments, labor hoarding, labor market institutions, labor market reforms, business cycle, short-time work schemes

JEL Codes: J2, J6

Cite as:
Joachim Möller, Germany’s Job Miracle in the World Recession—Shock-Absorbing Institutions in the Manufacturing Sector, Applied Economics Quarterly 56/1 (2010), pages 9-28.