High and persistent unemployment has been a major problem in Germany for decades. This article presents the theoretical reasons as well as individual and macroeconomic consequences of long-term unemployment. The so called Hartz Reforms aimed at reducing unemployment by reducing inflows and...

The labor market in Germany is more sclerotic and volatile than in the US. We show theoretically that sclerosis and large volatilities are two sides of the same coin. Both may be driven by large hiring costs and low quit rates.