Abstract

This project evaluates the macroeconomic effects of the Hartz IV reform in Germany  based on the selectiveness of firms. With lower unemployment compensation, a larger share of applicants obtains a job due to lower (reservation) wages, i.e. firms become less selective. We quantify this effect based on the IAB Job Vacancy  Survey and  run counterfactual simulations in a search and matching model with selection, which is calibrated to this dataset. Our approach circumvents several Problems of existing studies on the Hartz reforms.