Get access

Labour Market Institutions and Worker Flows: Comparing Germany and the US


  • We are grateful for comments received from Klaus Adam, Almut Balleer, Christian Bayer, Michael Burda, Georg Duernecker, Shigeru Fujita, Wouter den Haan, Tom Krebs, Alexander Ludwig, Iourii Manovskii, Christian Merkl, Petr Sedláček, Michèle Tertilt, Thijs van Rens and the participants at the ZEW Conference, the CESIfo conference on Macroeconomics and Survey data, the SED, the Cologne Macro Workshop, the ECB Joint Lunchtime Seminar and seminar participants in Cologne, Frankfurt, Mannheim and at the IAB in Nuernberg. We are particularly grateful to Markus Gangl and Iourii Manovskii for providing us with data on occupational mobility; and Nils Drews and Susanne Steffes for their comments and support in dealing with the IAB data. Jung gratefully acknowledges the Collaborative Research Center SFB-884 for financial support.


We compare labour market flows in the US and Germany between 1980 and 2004. In Germany, average worker flows in and out of unemployment are substantially lower; outflows are equally volatile in both countries; inflows are about twice as volatile in Germany and contribute more to the unemployment rate volatility. We explore four candidates for these differences: unemployment benefits; union bargaining power; employment protection and the efficiency of matching unemployed workers to open positions. We find that a lower matching efficiency in Germany can explain the bulk of the cross-country differences. It amplifies the business cycle and adds persistence.

Get access to the full text of this article