02175cas a2200253 a 4500 AALejournalIMF017560 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475592245 1018-5941 BD-DhAAL BD-DhAAL Krebs, Tom. Labor Market Institutions and the Cost of Recessions / Tom Krebs, Martin Scheffel. Washington, D.C. : International Monetary Fund, 2017. 1 online resource (85 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper studies the effect of two labor market institutions, unemployment insurance (UI) and job search assistance (JSA), on the output cost and welfare cost of recessions. The paper develops a tractable incomplete-market model with search unemployment, skill depreciation during unemployment, and idiosyncratic as well as aggregate labor market risk. The theoretical analysis shows that an increase in JSA and a reduction in UI reduce the output cost of recessions by making the labor market more fluid along the job finding margin and thus making the economy more resilient to macroeconomic shocks. In contarst, the effect of JSA and UI on the welfare cost of recessions is in general ambiguous. The paper also provides a quantitative appliation to the German labor market reforms of 2003-2005, the so-called Hartz reforms, which improved JSA (Hartz III reform) and reduced UI (Hartz IV reform). According to the baseline calibration, the two labor market reforms led to a substantial reduction in the output cost of recessions and a moderate reduction in the welfare cost of recessions in Germany. Mode of access: Internet Scheffel, Martin. IMF Working Papers; Working Paper ; No. 2017/087 Full text available on IMF http://elibrary.imf.org/view/journals/001/2017/087/001.2017.issue-087-en.xml IMF e-Library