Abstract

In this project, we describe the development of stocks and flows of short-term and particularly long-term unemployment in Germany over the business cycle from 1998 to 2009 using administrative data of the Federal Employment Agency. We try to isolate a pure business cycle effect in an empirical matching function. Such approaches based on the theory of matching have been used recently to investigate the impact of labour market reforms on the macroeconomic level (Fahr/Sunde 2009, Destefanis/Fonseca 2007). We control for the largest social and labour market reform in Germany, too. As an augmentation to common empirical matching functions, we distinguish between short-term and long-term unemployment. We apply three stage least squares estimation (3SLS) for our equation system.