Labor market reforms, precautionary savings, and global imbalances
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Beschreibung
How do labor market reforms affect international competitiveness and net foreign assets? To answer this question, we build a two-region RBC model with labor market frictions, idiosyncratic consumption risk, and limited cross-sectional heterogeneity to establish a direct link between labor market reforms and changes in net foreign assets via a precautionary savings channel. We apply the model to simulate far-reaching labor market reforms in Germany during the mid-2000s. We find that reducing the generosity of unemployment benefits decreases wages, fosters employment and augments competitiveness as well as trade. In addition, we can explain a significant share of the observed increase in German net foreign assets. A standard representative agent framework is not able to generate any notable effects on net foreign assets and the current account.
steht auch als elektronisches Dokument zur Verfügung (ISBN 978-3-95729-578-1)
Autor*in
Brigitte Hochmuth
Themen in »Labor market reforms, precautionary savings, and global imbalances«
Hartz IV Leistungsbilanz Wirkungsanalyse