Abstract

A few years after the Great Recession, economists become more and more aware of permanent effects of the crisis. Persistent unemployment is an example in some countries. The long-lasting effect of a cyclical impulse is called hysteresis. It used to be one prominent explanation for the stepwise increased of German unemployment in the 1970ies to 1990s. After the Hartz reforms, however, this pattern seemed to be interrupted, and the German labour market responded just modestly to the Great Recession. Our project compares the impact of cyclical versus structural impulses on unemployment in Germany, the US (and maybe Spain). The results may contribute to a better understanding of when and why unemployment becomes persistent.