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New CESA Working Paper: How Labor Market Reforms Shaped Germany’s Response to the China Shock
[15.10.2026]In the mid-2000s, Germany’s Hartz reforms coincided with the China shock. In CESA Working Paper No. 23, Andreas Hauptmann (IAB), Hans-Jörg Schmerer and Benjamin Schwanebeck (both FernUniversität in Hagen) disentangle the effects of the two. Their model accounts for 91 percent of the observed decline in German unemployment. The cut in unemployment benefits is the largest single driver, but trade generates most of the welfare gains. Benefits and trade are substitutes: evaluations of the reforms that ignore the trade shock overstate their effects by about 70 percent.
15.10.2026
