IZA compact Shaping the Future of Labor

www.iza.org March 2013

IZA Celebrates 15 Years of Success in Labor Market Research and Policy Advice

On the occasion of its 15th anniversary, network, the vital role of the IZA Discussion IZA celebrates and reviews its manifold ac- Paper series, now comprising over 7,000 1 15 tivities in scientific research and empirically studies, underlines the leading role of IZA in 99 based policy advice. In line with its mission, international labor economics. 8-2013 the institute takes a pioneering role in both of these areas on the national and interna- Thanks to a solid funding base provided tional level. Prominent labor economists by the Deutsche Post Foundation, comple- >> In This Issue from all over the world sent their best wish- mented by other sources of funding from es for IZA’s anniversary and underscored its all parts of the world, IZA is independent ANNIVERSARY EVENTS IN strong influence on the global debate. IZA from commissioned research and faces no WASHINGTON AND BERLIN Director Klaus F. Zimmermann, who founded restrictions concerning its research topics Many friends of IZA joined the cel- the institute 15 years ago, emphasized the and advisory activities. Members of the IZA ebration of its 15th anniversary with exceptional performance of the worldwide network are responsible for their own fund- events in the capitals of the U.S. and IZA network and announced new initiatives ing. Consequently, IZA’s research output re- Germany. page 2 for the future. flects the broad knowledge base of today’s labor economics with all its facets, regardless 10 YEARS OF AGENDA 2010 “I congratulate IZA on its splendid accomplishments of scientific approach IZA Compact summarizes the contri- over its first fifteen years. It has created a major fo- or social policy orienta- butions of the institute to supporting rum for the study of labor economics, the economics tion. and evaluating the German labor of human resources and the economics of the family market reforms. page 5 and of human development. IZA supports and sustains The IZA research agenda dialogue among scholars with competing visions of how to fosters our knowledge in do labor economics. It has fostered the development and the field by posing new ADVICE AND COOPERATION exchange of new knowledge. It has created a world com- research questions and For many years IZA has provided munity of scholars. Its working paper series, conferences bringing together leading top-level advice to the European and and workshops have greatly advanced the scientific study experts from its fellow German policymakers. page 7 of the workforce.” network to study these James Heckman (University of Chicago) questions in order to MIGRATION AND INTEGRATION provide answers based Numerous studies, research reports In 1998, when IZA was founded on the ini- on cutting-edge research. The continually and books on migration topics tiative of Deutsche Post, Germany’s largest expanded range of topics now covers such underscore IZA’s calls for an eco- employer, labor economics in Germany was diverse areas as labor market policy evalua- nomically motivated migration and largely marginalized. Science and practice tion; migration and integration; behavioral integration policy. page 8 were marked by helplessness in the face of and personnel economics; employment and constantly rising unemployment. Since then development; and the labor market aspects a lot has been achieved: IZA has greatly ad- of environmental policies. The main theme IZA POLICY PROGRAM vanced labor market research in Germany, behind all this research is “shaping the future A regular contributor to the Ger- Europe and the world. Committed to the of labor.” The causes and consequences of man labor market policy debate, highest scientific standards, IZA is indepen- labor migration flows; the interplay between IZA calls for continuing on the dently minded and concentrates on the most jobs, poverty reduction and economic devel- reform path towards an “Agenda pressing questions of our time. Supported opment; scientifically founded evaluation of 2020”. page 9 by the world’s largest network in econom- labor market programs – these are the high- ics comprising more than 1,200 fellows and lights of IZA’s research agenda. affiliates, IZA was able to quickly establish TESTIMONIALS an excellent reputation both nationally and IZA also puts great emphasis on bridging the Read what our network members say internationally. In addition to the dynamic gap between academic science and political about IZA. page 11

Institute for the Study of Labor | I Z A COMPACT | March 2013 15 Years of IZA

practice. Numerous national governments Supported by the World Bank, IZA is also Looking back on the past 15 years, IZA and international organizations, such as working on the upcoming launch of an is particularly indebted to the Deutsche the European Commission, the OECD ambitious online encyclopedia – the “IZA Post Foundation for its continuous sup- and the World Bank, regularly seek IZA’s World of Labor”. IZA’s pioneering role in port, which keeps IZA’s work indepen- advice, as does the wider public in many data technology is best reflected by its dent from outside funding and influ- countries. Since the demand for scientifi- International Data Service Center (IDSC), ence. Special thanks are also due to all cally founded policy advice is growing in which collects, explores, develops and fa- active and former employees, as well as the light of increasingly complex labor cilitates access to the most relevant data- the highly dedicated network members, market processes, independent science is sets for labor economists. The IDSC has who have contributed greatly to making more important than ever. With five newly developed its own software for secure re- IZA what it is today – the major driving established open-access online journals mote data processing, which is also used force behind international labor market IZA aims at stimulating and accelerating by other institutions. research. the scientific debate on key labor topics. IZA Research Fellows and Affiliates: IZA Discussion Paper Series: World’s largest network of economists Shaping the debate in labor economics 1400 8000

1203 7120 1200 7000

1075 6268 996 6000 1000 932 5418

828 5000 4680

800 739

669 3917 4000 602 3271 600 526 3000 2537

397 400 1910 312 2000 1449 255 192 975 200 1000 681 128 413 238 100 44 27 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Celebrating and Reviewing 15 Years of IZA: Anniversary Event in Washington

With its many research fellows from the Giulietti (IZA), also chaired the first panel. In of the Rural-to-Urban Migration in China Washington metro area and strong institu- her introduction, she emphasized the long (RUMiC) dataset and various co-organized tional partners, including Georgetown Uni- and intense research relationships that IZA workshops. versity and the World Bank, IZA is exception- Director Klaus F. Zimmermann has had over ally well connected in the U.S. capital. It was the years with each of the panelists, who are Martin Kahanec (Central European University therefore not a coincidence that IZA’s anni- all part of the IZA family and carry the shin- and IZA) gave an overview of the important versary celebrations were kicked off with a ing IZA torch in several parts of the globe. role IZA’s research has played in the grand one-day event in Washington, DC. In front of They testified from their personal experi- EU enlargement experiment, analyzing the over 100 invited guests from research, policy- ence on the Director’s strong research his- migration and labor market consequences of making and society, a number of prominent tory, the novelty of subjects studied, IZA’s EU enlargement, as well as IZA’s ties with the economists and IZA network sound research and policymak- emerging countries. Rainer Winkelmann (Uni- members gave short presenta- ing, and the impact of IZA out- versity of Zurich and IZA), who was among tions on labor market issues put on the wider community. the very first researchers at IZA, commented ranging from past and ongoing Nikos Askitas (IZA) presented on the pioneering role of IZA in building an IZA collaborations and projects the innovative use of new data international research network, encouraging to key topics of future research sources, including Google In- its young scholars to publish in high-quality in labor economics. The day sights data to show unemploy- journals, and making new data accessible for was rounded off with a keynote ment trends and truck toll data labor market research. Michael R. Veall (Mc- speech by U.S. Undersecretary to “nowcast” industrial produc- Master University and IZA) emphasized the of State Robert D. Hormats on tion. Ulf Rinne (IZA) explained role of IZA in capacity building, elaborating Robert D. Hormats the future of transatlantic co- that the recent labor market on how an early project with Zimmermann operation. reforms in Germany played an on the measurement of econometric good- essential role for the country’s remarkable ness-of-fit in nonstandard situations had Panel I: IZA Research Collaborations resilience to the economic crisis and for provided useful training for students and what is now widely perceived as the German influenced research in other disciplines as Amelie F. Constant (George Washington Uni- “job miracle”. Corrado Giulietti reported on well. John P. Haisken-DeNew (University of Mel- versity, Temple University and IZA), who IZA’s collaboration with Chinese research bourne and IZA) reminisced about the early welcomed the guests together with Corrado institutions, including the development years of his collaboration with the Director

2 Institute for the Study of Labor | I Z A COMPACT | March 2013 15 Years of IZA

and underlined the unique opportunity of project with Georgetown University, which ics about which parts of the private sector having IZA collaborating with Australia in gives Ph.D. students from outside the U.S. have vested commercial interest. David G. new migration ventures. the opportunity to interact with prominent Blanchflower (Dartmouth College and IZA) labor economists and create networks with analyzed employment and unemployment Panel II: Key IZA Projects and Partnerships local researchers from the Washington trends during the Great Recession and dis- metro area. Michael L. Bognanno (Temple cussed possible explanations for the “pro- In the second panel on selected IZA pro­ University and IZA) reported on his expe- ductivity puzzle” of declining output per jects and partnerships, Arup Banerji (World rience as an IZA Visiting Research Fellow worker recorded in the UK. Bank and IZA) reflected on the strong and highlighted the importance of the IZA IZA/World Bank partnership, which aims visitors program for the exchange of know­ George J. Borjas (Harvard University and at filling important knowledge gaps and ledge and experience between labor econo- IZA) and Barry R. Chiswick (George Wash- providing practical policy advice for labor mists from around the world. ington University and IZA), winners of the markets in the developing world. David 2009 IZA Prize, outlined the “past, present Lam (University of Michigan and IZA) re- Hilmar Schneider (IZA Director of Labor and future” of migration research. Borjas ported on recent activities within the IZA/ Policy) focused on IZA’s contributions to discussed the costs and benefits of high- DFID Growth and Labour Markets in Low the German policy debate and the evalua- skilled immigration that must be consid- Income Countries Programme (GLM|LIC). tion of labor market reforms in Germany. ered by developed countries in their global The presentation by Hartmut Lehmann (Uni- He also talked about the development and competition for the best and brightest. versity of Bologna and IZA), Program Di- use of the IZA Evaluation Dataset. Alexander Chiswick, who served as IZA Program Di- rector for “Labor Markets in Emerging and S. Kritikos (University of Potsdam and IZA) rector for eight years, added that attract- Transition Economies”, focused on IZA re- gave insights into the “IZA World of Labor” ing low-skilled and mid-level personal care search on informal employment in Georgia project. workers for children and the elderly will and Russia, the creation of the Ukrainian also become increasingly important for Longitudinal Monitoring Survey (ULMS), After the presentations, panel moderator OECD countries. and the newly established open-access IZA Núria Rodriguez-Planas (IZA, IAE-CSIC and Journal of Labor & Development. UPF) left some room for a general discus- Gary S. Fields (Cornell University and IZA) sion about the top labor market policy discussed how labor market research can Erdal Tekin (Georgia State University and challenges the world is facing today. contribute to minimizing poverty and maxi- IZA) reported on the Journal of Population mizing labor market well-being in develop- Economics, which is headquartered at IZA, Panel III: Frontiers of Labor Research ing countries. He stressed the importance of and the Annual Meetings on the Econom- sound labor market models for the design ics of Risky Behaviors (AMERB), a success- Starting the third panel talks, Orley C. Ashen- of sound labor market policies to help the ful event series for which IZA joined forces felter (Princeton University and IZA), recipi- world’s poor. Former IZA Research Director with GSU’s Andrew Young School of Policy ent of the 2003 IZA Prize in Labor Econom- Daniel S. Hamermesh (University of Texas at Studies. Francis Vella (Georgetown Universi- ics, stressed the need in society for objective Austin, RHUL and IZA) analyzed publishing ty and IZA) provided feedback on the First independent research – of the kind done in trends in the top economics journals over IZA@DC Young Scholar Program, a joint universities and institutes like IZA – on top- the past 50 years. While the age distribution

Ashenfelter Oswald Banerji Hamermesh Borjas Zimmermann Winkelmann

Richter Kapteyn Schneider Rinne Constant Fields Haisken-DeNew

Lehmann Rodríguez-Planas Giulietti Bognanno Kritikos Lam Chiswick

Tekin Vella Askitas Jimeno Blanchflower Veall Kahanec

Institute for the Study of Labor | I Z A COMPACT | March 2013 3 15 Years of IZA

shifted towards older authors, the share of Andrew J. Oswald (Warwick University and for the 21st century is to leverage our com- theory papers decreased substantially in fa- Acting Research Director at IZA), who mon bond to help integrate a new group of vor of articles based on own empirical and moderated the panel, congratulated the economic actors – principally China but also experimental data. He also pointed at the panelists on their interesting talks and es- India, Russia, and others – into the interna- high quality of research presented at the an- pecially on keeping to time, and congratu- tional system.” He also stressed that “in this nual IZA/SOLE Transatlantic Meetings. lated IZA’s director and staff for what had new and different post-Cold War world, been achieved in 15 years. we need to encourage new generations of Juan F. Jimeno (Bank of Spain at IZA) looked Americans and Europeans of the profound at frontiers in labor economics from a mac- Keynote Speech and Discussion importance of US-European ties.” This was ro angle and discussed the implications the basis for the subsequent discussion with of the financial and labor market crisis in In the evening session, Robert D. Hormats, moderator Stephan Richter (The Globalist) Southern Europe for policy-oriented re- Under Secretary of State for Economic and IZA Director Zimmermann, who, ac- search. In the last presentation of the day, Growth, Energy, and the Environment, de- cording to Hormats, “has been a real leader Arie Kapteyn (RAND and IZA) talked about livered the keynote speech on “How the in the area of transatlantic cooperation.” the health effects of retirement and how (Re-)Emergence of China and Asia Creates countries deal differently with the chal- New Opportunities for Transatlantic Co- The full text of the keynote is available at: lenge of rising life expectancy and longer operation.” Hormats, who went on a trip working lives. to China the next day, said, “the challenge  www.iza.org/washington2012/hormats

Anniversary Event in Berlin: Towards an Agenda 2020

The 15th anniversary celebra- Peter Clever (Confederation tions continued in Berlin with of German Employers’ Asso- a policy-oriented event draw- ciations) stressed that both ing a number of guests from employers and unions con- the German capital’s research tributed to the strong labor and policymaking communi- market situation by engaging ties. The welcome address in a foresighted, consensus- by Jo Ritzen (see excerpts be- oriented policy aimed at cre- low), was followed by a panel ating and sustaining jobs. discussion on “Agenda 2020 Rudolf Hickel (IAW, University – How sustainable is the Ger- of Bremen) rejected the term man job miracle?”. IZA Direc- “job miracle” and argued tor Klaus F. Zimmermann at- that, with all the euphoria tributed the remarkable crisis Rudolf Hickel, Klaus F. Zimmermann, Peter Clever about rising employment, the resilience of the German labor problem of rising inequality market in large part to the enhanced flex- called on policymakers to stay on the re- should not be overlooked. Both Clever ibility achieved with the Agenda 2010 re- form path and put a particular emphasis and Hickel commended the work done at forms (see article on the next page). He on tackling the demographic challenge. IZA. “IZA Brings Science and Politics Together”: Excerpts from the Speech by Jo Ritzen

Like hardly any other institution, IZA has of practice-oriented policy advice. What This was my first “lesson learned” with re- built a bridge between science and politics the Dutch government (and others as well) gard to the relationship between politics during the past 15 years – both nation- needed was a bridge between labor mar- and labor market research: Scientifically ally and internationally. This achievement ket research and labor policy. founded findings give policymakers more cannot be overstated because this impor- room to maneuver. While research itself tant connection was previously almost In my new function I had hoped for sup- need not be concerned with questions of non-existent. I say this as someone who port from science, but I received little. The feasibility and practical implementation, has been on both sides during my career economic model employed by the CPB, it does indicate which way to go. – a scientist, professor and president of a the leading Dutch research institute, was university, and a politician, as the Dutch very limited. For instance, it provided no Nonetheless, the relationship between minister of education, culture and science, answers to such questions as how a re- politicians and researchers remains com- and vice president at the World Bank. form of unemployment benefits would af- plicated. Academics tend to feel that fect employment and unemployment du- politicians do not take them seriously When I turned to politics in the early ration, or how changes in sick pay would enough. In turn, politicians feel that re- 1980s, the Netherlands were facing a se- affect absenteeism. This made it difficult searchers often have no answer to po- vere employment crisis, with unemploy- for the government to justify labor policy litical questions and do not understand ment approaching 10 percent. Scientific programs that were considered necessary. the complexity of policymaking. Still, research at the time – quite frankly – had My experience at the World Bank con- both groups need each other. The key few things to offer for labor market poli- firmed that a lack of policy-relevant scien- task for scholars is to outline the gen- cymakers. To be sure, theoretical know­ tific findings severely limited the scope of eral direction for sound policy initiatives. ledge was abundant, but there was a lack policymaking. Politicians must try to implement this in

4 Institute for the Study of Labor | I Z A COMPACT | March 2013 AGENDA 2010

their daily business in parliaments and Commission, IZA quickly connects with IZA right from the start and accompa- the cabinet. Scholars often criticize that the respective international experts. nied by extensive own labor market policy these processes are too slow and not well- While this does not rule out that some proposals. Incorruptible objectivity has targeted. Most scientific models do not global political questions remain unan- always been at the core of all activities. account for the political implementation swered, one can be certain that the an- The range of topics covered by IZA has of a measure that is considered the right swers provided are based on state-of- been remarkably wide, as a glance at its thing to do. In the minds of researchers, the-art research. numerous studies and reports shows. the road from A to B is a straight line, but politicians often have to make large de- For the future I see two important trends. tours to get there. “IZA is not bound by political The first is related to the question of sus- ideology. Instead, what tainability. We are facing a world full of IZA’s aim is to derive policy advice from matters to IZA is whether ecological crises. With the establishment scientifically founded evidence. This is policy-relevant statements of its new research program on “Environ- why, beyond pure research, IZA engages have a sound empirical foundation.” ment and Employment”, IZA made the in an intensive dialogue with policymak- Jo Ritzen (former Dutch Minister right decision and will certainly contrib- ers. This is essential for politics, and it of Education; former President, ute to the policy debate on environmen- is what I missed as an active politician. Maastricht University; former tally sustainably production and green If there had been an IZA at the time, my Vice President, World Bank; jobs. The second trend: Different strat- work would probably have been much Senior Advisor, IZA) egies to solve economic policy problems easier. in European countries serve as “social ex- Most importantly, the findings must be periments” from which valuable conclu- What is so unique about IZA? Without a evidence-based. If studies on same topic sions for other countries can be drawn. doubt, it is the IZA way of bringing to- arrive at contradictory results – which is This kind of mutual learning is essential gether scientific expertise from the entire not unusual as it is part of the nature of in times of crises like the current euro global community of labor economists. science – one has to decide which study crisis. All European countries are in the IZA successfully built a huge network of is more reliable. Policymakers cannot do same boat, but each nation has its spe- Research Fellows who make use of the in- this on their own. They need the support cific characteristics and follows an indi- stitute for the exchange of knowledge. If of researchers who can make an informed vidual course. I believe there is still a lot you want to know the state-of-the-art in judgment based on specific criteria, in- to learn from each other. With its inter- labor economics, you only need to look cluding methodology and quality of data. national network of outstanding labor into the IZA Discussion Paper Series – the IZA certainly has plenty of competence economists, IZA is perfectly suited for largest of its kind in the world. Becom- for such judgments. This is why evidence- strengthening the exchange of experience ing a member of the IZA network is highly based policy advice has become a trade- between science and politics. attractive and valuable for labor econo- mark of the institute. mists. IZA is an organization that draws its val- IZA has advised the World Bank, the Eu- ue from the interaction between many in- What is more, IZA uses the gathered ropean Commission, many national gov- dividual players. I congratulate all those knowledge for successful policy advice. ernments, companies, and foundations. who are involved to 15 years of successful When it comes to research or advisory Important policy initiatives like Germa- work at IZA! projects for ministries or the European ny’s “Agenda 2010” were supported by Ten Years of “Agenda 2010”: IZA’s Contribution to German Labor Market Reforms

A decade ago the German labor market ries of concrete measures to reform the merging of unemployment aid and welfare was regarded as a sick patient. Today it labor market, the social security system benefits into basic income support for job is performing exceptionally well and has and public finances. A committee led by seekers, (6) liberalization and expansion been remarkably resilient to the financial Peter Hartz (then board member for hu- of flexible forms of employment such as and euro crisis. This must be attributed at man resources at Volkswagen) worked temporary work, fixed-term contracts and least in part to the courageous “Agenda out proposals to improve the public em- small-scale employment (“mini jobs”). 2010” labor market reforms, which were ployment services and to design more ef- introduced – against massive resistance – ficient labor market policies. These were A number of studies by IZA experts show in March 2003. From the very beginning, enacted in what came to be known as the that these measures have in many areas IZA has constructively supported and sci- “Hartz Acts I-IV”. improved the functioning of the German entifically evaluated this reform process. employment system and the effectiveness Today, ten years later, it has become ob- Key elements of the reform package were: of policy programs ( IZA DP 2055, IZA vious that the “Agenda 2010” project has (1) reform of active labor market policy DP 2605). As a result, the employment left a lasting positive mark on the Ger- instruments, (2) restrictions on welfare rate has risen substantially since the mid- man labor market. benefits for the unemployed, (3) mod- 2000s, particularly with many new jobs ernization of the employment agencies, created in the service sector. This would Let’s go back in time: On March 14, 2003, (4) stronger activation of the unemployed not have been possible without a more then German Chancellor Gerhard Schröder through the principle of “supporting and flexible labor market and a consistent ac- of the Social Democrats announced a se- demanding” (Fördern und Fordern), (5) tivation of the unemployed.

Institute for the Study of Labor | I Z A COMPACT | March 2013 5 AGENDA 2010

IZA has contributed its expertise in vari- viders, the increase in competition caused the long-term unemployed ( IZA DP ous ways: Beyond publicly supporting the by the introduction of a voucher system, 6499). Thus, small-scale employment reform process (e.g. by initiating calls of and the improved selection of program contributes at least indirectly to improv- economists) and providing policy advice, participants made the programs signifi- ing reintegration prospects. IZA researchers have extensively studied cantly more effective and efficient ( IZA the effectiveness of several reform com- DP 2069, IZA DP 3910, IZA RR 10). Beyond the overall positive findings with ponents. In light of the predominantly regard to active labor market policies, an- positive results, IZA experts are highly In addition, IZA analyzed the so-called other IZA study showed that unemployed critical of recent plans by policymakers transfer programs, include a short-time individuals with a perceived high probabil- to roll back some of the reforms. work allowance (Transfer-Kurzarbeitergeld), ity of joining a program lowered their res- which aim at supporting and facilitat- ervation wages and increased their search Among the active labor market policy in- ing the job transition for employees fac- efforts ( IZA DP 3825). In other words, struments analyzed by IZA were various ing layoff due to corporate restructuring. the existence of a program alone has a measures to promote self-employment. While the evidence found no evidence of “deterrent” effect in a positive sense. Fur- In addition to the bridging allowance positive effects, the reforms at least miti- ther research will need to examine wheth- (Überbrückungsgeld) established in the mid- gated the negative effects that were previ- er this affects the quality of subsequent 1980s, the Hartz reforms introduced a ously found ( IZA RR 10). However, con- employment. start-up allowance (Existenzgründungs­ sidering the limited effectiveness and the zuschuss, “Ich-AG”) in order to help a larger high costs of these programs, they should Other IZA studies on German labor group of people find their way into self- be critically reviewed. market trends since the mid-2000s con- employment. Long-term analyses con- centrated on the role of “standard em- ducted by IZA find that both programs A widely debated element of the Hartz ployment contracts” and “atypical em- are effective at integrating participants reforms was the expansion of small-scale ployment” ( IZA RR 22, 23, 25). Flexible in the labor market and improving their employment (mini/midi jobs). An IZA forms of employment account for a large incomes. The subsidized start-ups also study found that these jobs had negative share of the newly created jobs. This was create additional jobs for other (previ- fiscal effects and tended to displace reg- particularly beneficial for the previously ously unemployed) individuals ( IZA DP ular employment ( IZA RR 47). On the underdeveloped German service sector. 3880). Given these positive findings, it is other hand, they had a positive impact on There are now more jobs, but also more difficult to understand why the successful the search behavior of unemployed indi- types of jobs. start-up programs were recently cut again. viduals, who are able to complement their income during unemployment spells by In analyzing these issues, IZA was able Another subject of investigation by IZA working up to 15 hours per week. Lower to draw on the expertise of its strong re- was the new strategy initiated by the Hartz social security contributions provide an search network, the largest network of reforms in the area of subsidized further incentive to take up this form of employ- labor economists worldwide. IZA research training. The certification of service pro- ment, which is particularly attractive for fellows and affiliates contributed a num- ber of studies on German labor market policies and, in particular, activation IZA Discussion Papers programs. For example, macroeconomic Vouchers and Caseworkers in Public Training studies empirically confirm that the re- Konzentration statt Verzettelung: Die deutsche Programs: Evidence from the Hartz Reform in forms have reached their main goal to Arbeitsmarktpolitik am Scheideweg Germany shorten individual unemployment spells IZA DP 2055 http://ftp.iza.org/dp2055.pdf IZA DP 3910 http://ftp.iza.org/dp3910.pdf ( IZA DP 2470). Job placement became Wirksamkeit der Förderung der beruflichen Determinanten des Suchverhaltens von much faster and more efficient. The Weiterbildung vor und nach den Hartz- Arbeitslosen: Ausgewählte Erkenntnisse “Agenda 2010” also increased the overall Reformen basierend auf dem IZA Evaluationsdatensatz effectiveness of active labor market policy IZA DP 2069 http://ftp.iza.org/dp2069.pdf IZA DP 5379 http://ftp.iza.org/dp5379.pdf in Germany ( IZA DP 2100). Before and After the Hartz Reforms: The The IZA Evaluation Dataset: Towards Performance of Active Labour Market Policy Evidence-Based Labor Policy-Making in Germany IZA DP 5400 http://ftp.iza.org/dp5400.pdf IZA DP 2100 http://ftp.iza.org/dp2100.pdf Alte Idee, neues Programm: Der IZA Research Reports Did the Hartz Reforms Speed-Up Job Gründungszuschuss als Nachfolger von Creation? A Macro-Evaluation Using Empirical Evaluation der Maßnahmen zur Umsetzung der Überbrückungsgeld und Ich-AG Matching Functions Vorschläge der Hartz-Kommission IZA DP 6035 http://ftp.iza.org/dp6035.pdf IZA DP 2470 http://ftp.iza.org/dp2470.pdf IZA RR 10 www.iza.org/link/report10.pdf Another Economic Miracle? The German Dann waren’s nur noch vier… Arbeitsmarkt und Beschäftigung in Labor Market and the Great Recession Wie viele (und welche) Maßnahmen der Deutschland 2000-2009 IZA DP 6250 http://ftp.iza.org/dp6250.pdf aktivenArbeitsmarktpolitik brauchen wir IZA RR 22 www.iza.org/link/report22.pdf noch? Marginal Employment, Unemployment Traditionelle Beschäftigungsverhältnisse im IZA DP 2605 http://ftp.iza.org/dp2605.pdf Duration and Job Match Quality Wandel IZA DP 6499 http://ftp.iza.org/dp6499.pdf The Effect of Active Labor Market Programs IZA RR 23 www.iza.org/link/report23.pdf on Not-Yet Treated Unemployed Individuals The Unexpected Appearance of a New German Atypische Beschäftigung und Niedriglohnarbeit IZA DP 3825 http://ftp.iza.org/dp3825.pdf Model IZA RR 25 www.iza.org/link/report25.pdf IZA DP 6625 http://ftp.iza.org/dp6625.pdf Die Nachhaltigkeit von geförderten Geringfügige Beschäftigung: Existenzgründungen aus Arbeitslosigkeit: Eine Is Germany the North Star of Labor Market Situation und Gestaltungsoptionen Bilanz nach fünf Jahren Policy? IZA RR 47 www.iza.org/link/report47.pdf IZA DP 3880 http://ftp.iza.org/dp3880.pdf IZA DP 7260 http://ftp.iza.org/dp7260.pdf

6 Institute for the Study of Labor | I Z A COMPACT | March 2013 IZA COOPERATION

In sum, the Hartz reforms and the “Agen- Now that the important parameters of additional measures to promote female da 2010” mark the beginning of a new active labor market policy have been ad- employment. Other aspects include more area in German labor market policy with a justed, policymakers and scientific advi- individual scope in shaping one’s working long overdue redesign of the German em- sors must focus on how to prepare the life and retirement, as well as enhancing ployment model. The outstanding perfor- German labor market for the dramatic Germany’s attractiveness for high-skilled mance of the German labor market during consequences of demographic change. immigrants. IZA will continue to accom- the current crisis is owed, at least in part, Improving education and “life-long learn- pany these necessary reforms in a critical to the “Agenda 2010” ( IZA DP 6250, ing” are just as essential as establishing and constructive manner. IZA DP 6625, IZA DP 7260). family-friendly workplace practices and IZA Provides Top-Level Advice to European Commission, European Parliament and German Policymakers

Brussels for policy-oriented conferences. Moreover, IZA maintains a close partnership with the OECD in Paris.

At the same time, IZA pro- vides extensive, independent advice to German policymak- ers. Coordinated by IZA Di- IZA contributes to European policymak- bility and labor market rector Zimmermann, IZA re- ing in various ways. The institute’s in- integration of people with searchers accept invitations volvement ranges from participation in disabilities, and the role to join advisory bodies to high-level advisory bodies to the Presi- of social protection as an the federal government and dent of the European Commission, to economic stabilizer dur- to parliamentary commit- which IZA Director Klaus F. Zimmermann ing the economic and fi- tees. In addition, the politi- was appointed several times, to the pro- nancial crisis. In addition, cal parties represented in the vision of expert reports for the Commis- an analysis of the labor Bundes­tag, the office of the sion and frequent advisory activities for market integration of mi- German President, and state the European Parliament. IZA reports grants and a comparative governments have sought for the European Commission included study of the EU pension IZA’s advice on various oc- the methodology of comparative labor systems were conducted casions. Recognizing IZA’s market policy evaluation, as well as ques- for the European Parliament. expert knowledge and ideological inde- tions of social and economic integration pendence, numerous federal ministries of ethnic minorities, and the geographic Beyond providing direct advice to the EU have commissioned IZA with research mobility of labor within the European policy institutions, IZA puts great em- reports on key labor market issues. The Union. phasis on bringing together academic scope and topics of these reports reflect science and policymakers across Europe, the generally increasing demand among For the European Parliament IZA ana- as reflected by the growing network of policymakers for independent research. lyzed, among other issues, the progress international IZA Policy Fellows. The achieved under the Social Agendas, mo- IZA network regularly comes together in

Employment and Development: Extensive Collaboration with the World Bank

IZA has collaborated successfully with the knowledge gaps and weak capacity have  www.jobsknowledge.org World Bank for many years. In 2006 both limited the identification and implementa- institutions launched a joint research area tion of effective labor market policy reforms Most recently IZA was involved in the and a joint annual conference on “Employ- in developing and transition countries. The preparation of the World Development ment and Development.” At the heart of this annual conference, with alternating venues Report 2013. For the first time in decades, partnership is the development of opera- in Germany and countries of the developing the report concentrates on jobs stating tionally oriented research and policy advice world, offers an excellent opportunity for re- that employment is a cornerstone of de- on labor market issues. The World Bank and searchers and practitioners to fill these gaps. velopment. IZA has contributed an ex- IZA share a common mission in promoting The successful collaboration was formally tended background study focusing on the rigorous research and evidence-based policy expanded in 2011 to include the joint devel- role of vocational training for job creation analysis to support countries with the design opment of the World Bank Jobs Knowledge among young people. and implementation of labor policies to cre- Platform, which propagates and discusses ate and provide access to jobs. Important the role of jobs for economic development.

Institute for the Study of Labor | I Z A COMPACT | March 2013 7 MIGRATION AND INTEGRATION

IZA Agenda for Migration and Integration In Germany, Europe and around the tially influenced the report delivered by The analysis highlighted that anonymiza- world, IZA calls for improved migration the EU Commission’s “High Level Advi- tion of attributes such as name, pho- policies based on economic needs, as sory Group of Experts on the Social Inte- tograph, gender, age and ethnic origin well as a systematic integration of im- gration of Ethnic Minorities and their Full of the applicant is effective at creating migrants in the host societies and labor Participation in the Labour Market”. To equal opportunity for all groups to get a markets. In order to achieve a better al- avoid labor market segmentation along job interview. location of human capital, but also for the lines of ethnic minority status is one social justice reasons, the importance of the greatest integration challenges fac- The project also showed that the poten- of sustainable migration and integra- ing European labor markets today. tial of anonymization is rather limited tion policies is rising. Against this back- in organizations that have already taken ground, IZA has substantially expanded In a 2011 report for the European Parlia- other measures to promote diversity in its Migration program area. Numerous ment, IZA assessed the social, economic the workplace. IZA studies and policy proposals in this and legal situation of migrants in the EU field have strongly influenced the debate and proposed relevant policy EU Enlargement, on the future of migration and integra- actions on a European level Free Movement, and tion in recent years. ( IZA RR 40). In 2012 IZA Intra-EU Mobility and its partners conducted Social and Economic Integration a “Study on Active Inclusion The 2004 and 2007 en- of Migrants” on behalf of largements of the European Funded by the Volkswagen Foundation, the European Commission. Union led to increased flows IZA participated in a large interdisci- Whereas public concerns of workers from Eastern to plinary network and studied the high have risen about the “policy Western Europe. Although relevance of migrant ethnicity as a deter- failure” deriving from ex- these flows have been much minant of immigrant economic adjust- cessive welfare spending on weaker than widely expect- ment. The IZA experts analyzed influenc- migrants, findings from the ed, they have nonetheless ing factors such as language acquisition, study suggest that failure had a substantial impact on naturalization, (interethnic) marriages, instead relates to the inad- labor markets. At an early and ethnic entrepreneurship to develop equate access of migrants to stage IZA proposed that a multidimensional measure of ethnic- social supports and services. Germany should implement ity. Ethnic identity proves to be a mo- Specifically, the statistical free movement of labor in mentous determinant of immigrants’ analyses show that migrants’ order to benefit from high- economic success – an effective immigra- welfare take-up is lower, not skilled migration. Thorough tion and integration policy must account higher, than that of com- research conducted by IZA for these findings. According to the IZA parable natives. The study and its network has shown studies, complete assimilation need not finds no evidence of a “wel- since then that indeed those be a labor market advantage, whereas fare magnet hypothesis”: EU countries that immedi- at the same time immigrant ethnic sepa- social expenditure does not ately granted free mobility ration (ethnic identity focused on the appear to be a significant (fully or at least partially) for home country’s culture) or even margin- determinant in the decision Eastern European migrants alization (lack of ethnic identity) must be of migrating to an EU mem- were at an advantage. avoided. Sustainable social and econom- ber state. The findings from ic integration implies equal opportunities the study call for welfare Even during the economic and ethnic diversity as well as sufficient policies that strengthen the crisis this advantage still language skills. active inclusion of migrants, prevailed, whereas coun- with a long-term perspective of activat- tries like Germany, whose free movement Commissioned by the European Com- ing migrants in the labor market instead legislation went into effect very late as a mission IZA provided a comprehensive of being designed to myopically minimize consequence of this short-sighted policy, “Study on the Social and Labor Market social expenditure in the short run. had little chance to catch up since skilled Integration of Ethnic Minorities in Eu- labor migration was already declining. rope.” Social and economic exclusion Pilot Project for For its 2009 book on “EU Labor Markets remains an everyday challenge for mil- Anonymized Job Applications After Post-Enlargement” IZA assembled lions of members of ethnic minorities liv- a number of important case and country ing in Europe, as the analysis shows. As Empirical studies point to a serious ex- studies. Based on rigorous analysis and a consequence, vast economic and hu- tent of discrimination in the German la- hard data, the book makes a convincing man capital potentials remain untapped. bor market. Both hidden and open dis- case that there is no evidence that the Based on an expert opinion survey the crimination lead to an enormous waste post-enlargement labor migrants would IZA study identified clear deficits while of potential. Particularly the unequal on aggregate displace native workers or at the same time presenting successful treatment of women, migrants and older lower their wages, or that they would be “good practice” examples and policy op- job applicants causes substantial eco- more dependent on welfare. tions on the road to better integration. nomic damage. Against this background The IZA findings and country studies are the German Federal Anti-Discrimination While brain drain may be a concern in the available as an IZA book on “Ethnic Di- Agency initiated a pilot project for ano- Eastern European source countries, the versity in European Labor Markets: Chal- nymized job applications, scientifically anticipated brain circulation between EU lenges and Solutions” and have substan- accompanied by IZA ( IZA RR 44). member states may in fact help to solve

8 Institute for the Study of Labor | I Z A COMPACT | March 2013 POLICY DEBATE

their demographic and economic prob- Points System for Labor Migration presentation of a proposal for a detailed lems, and improve the allocative efficien- to Germany points system for German in 2011 gave cy in the EU. Free mobility of people is a new impetus to this important debate cornerstone of the European Union. How IZA has always held a clear position in ( IZA RR 35). The IZA model centers to ensure that it is upheld in all aspects, the German debate on the pros and cons on a three-pillar strategy. The first pillar that it contributes to economic prosper- of a new immigration policy based on targets immigration of the high-skilled, ity as well as the well-being of the indi- economic needs. In 2000, the federal mainly university graduates. The second vidual and the society, and that it helps government installed an “Independent pillar enables and controls immigration to alleviate economic and financial dis- Commission on Immigration”, to which of skilled workers, who do not hold an turbances such as the ongoing economic IZA submitted a report that called for a academic degree but possess sector-spe- crisis, is a major policy task for the pres- selective immigration policy as success- cific skills through vocational training in ent and future. fully implemented by other nations. The labor market segments that are expected Commission followed this proposal in to exhibit shortages in the medium to This argument is underscored by another its final report published in 2001. None- long term. The third pillar covers tem- IZA study, already delivered in 2008 to the theless, the German immigration act fi- porary immigration to satisfy short-term European Commission: The economic ef- nally passed after fierce policy debates in excess labor demand in specific sectors. fects of free geographic mobility are clear- 2005 contains very few elements of this With this concept IZA provides a ready- ly positive, and stimulating intra-Europe- kind. to-implement migration policy proposal. an mobility would increase the welfare of the vast majority of Europeans. It would Since then, IZA has underscored its posi- The Research Reports referred to in this also help cushion the impact of demo- tion at various occasions and has taken a text are downloadable at: graphic change. lead among those who favor an economi- cally motivated immigration policy. The  www.iza.org/link/reports

IZA Experts’ Positions in the German Policy Debate

In the light of current events, IZA has sub- demographically viable pension system, further changes in labor market policy mitted numerous reform proposals in the and a more flexible labor market ( IZA processes. The program acknowledged form of brief statements as well as com- Compact November/December 2002). the progress so far achieved with reforms prehensive commentaries on labor mar- and specified policies linked to the prog- ket policy. The institute also involves oth- A 2003 IZA initiative to support the re- ress made ( IZA SP 2). er renowned economists in joint reform cently announced reform intentions of proposals or participates in selected ini- the German federal government resulted Based on this program IZA followed up tiatives to strengthen the acceptance of in 300 renowned economists signing an with its “Agenda 2020” in March 2010 endeavors to modernize labor markets open letter to German policymakers and and described policy options on the way and social policy. Part of IZA’s mission is the general public. With the clear mis- to regain full employment within a de- to be a driving force for economic effi- sion to foster the “Agenda 2010” con- cade. This most recent policy concept ciency and social equality. cept, they called for the courage to take developed by IZA highlights the crucial painful yet necessary steps to modernize reform needs of the German education From the very beginning, IZA has stimu- the labor market. This initiative is still to sector and urges policy makers not to un- lated the German reform debate. In the be seen as one of the most striking con- derestimate the severe consequences of “Petersberg Declaration for a Future-Ori- certed reactions to the political reform demographic change for the labor market ented Labor Policy,” IZA Director Klaus process by German economists ( IZA ( IZA PP 15). F. Zimmermann and five other prominent Compact July/August 2003). economists called for an incentive-based With this series of policy initiatives and employment policy, a reform of income IZA experts introduced the workfare con- by taking up a clear and independent taxation, and a selective immigration cept into the political debate in 2006 and stance in the ongoing reform debate, IZA policy. This declaration marked the start- stimulated the ongoing debate on work stepped at the forefront of policy-orient- ing point for a series of IZA policy posi- incentives for benefit recipients accord- ed labor market research in Germany. In tions and proposals in the years to come ing to the “quid pro quo” principle. At line with its mission to provide and dis- ( IZA DP 24). the same time the concept delivered a seminate concepts for the future of labor, convincing argument against in-work IZA will continue to encourage further In 2002, before the implementation of benefits, which were widely discussed German labor market reforms. The suc- the German government’s “Agenda 2010” in Germany at the time. While the latter cessful modernization undertaken since reform package, IZA presented a de- no longer play a major role in the current 2003 also reaffirms IZA’s policy propos- tailed labor market policy program for debate, some workfare elements have at als. all relevant areas of reform, ranging from least been implemented in employment pension systems to education. Some of services on the local level ( IZA Com- The publications referred to in this article the IZA proposals have meanwhile been pact October 2006). are downloadable at: implemented, while others remain as rel- evant and urgent as ever. The IZA policy IZA started another labor market pro-  www.iza.org/link/policyproposals agenda recommended a reform of un- gram initiative at the end of 2008. The employment insurance, a modernization aim was to reinvigorate flagging reform of the collective bargaining autonomy, a efforts and highlight the inevitability of

Institute for the Study of Labor | I Z A COMPACT | March 2013 9 IZA RESEARCH

Raising Female Employment: IZA Research Calls for Family-Friendly Working Arrangements

Providing better options to combine fam- In a number of studies IZA critically assessed One of the IZA studies shows that if public ily and career is one of the most important Germany’s family policy in regard to labor and private childcare facilities were suf- approaches for policymakers to address market aspects and gave policy recommen- ficiently expanded, mothers with children the growing shortage of skilled workers. dations to create a more family-friendly work under 16 would increase their working The vast human capital resources of young environment. The IZA experts found that hours in the magnitude of about 1.5 million women and mothers remain largely unused more and better childcare facilities and day- full-time equivalent jobs. These findings because there is still a lack of flexible work care for school children would substantially show that family policy can contribute to arrangements and childcare facilities. From change women’s labor supply decisions. IZA fighting the impending skilled labor short- a fiscal perspective, while social security also calls on employers to allow for more flex- age by providing more employment incen- provided to families is comparatively high, ible working hours on all levels of qualifica- tives for skilled mothers. so is the marginal tax burden on extra in- tion, more telecommuting and job-sharing, come earned by spouses who work in more more part-time positions close to full-time,  IZA Research Reports 17, 30, 33, 37, 39 than a “mini-job.” In other words, the cur- and options to work part-time or receive fur- rent system still favors single wage-earners ther training during parental leave. Moreover,

IZA Research Report No. 17 IZA Research Report No. 30 IZA Research Report No. 33 IZA Research Report No. 37 IZA Research Report No. 39 IE S (with little extra income) and penalizes the current system of income tax splitting for IE S R R E ERIE S ERIE S ERIE S E Aktivierung von Fachkräftepotenzialen: S S S S S

Vereinbarkeit von Familie und Beruf 2010 T T T T Familienfreundliche flexible Arbeitszeiten - ein T Schulergänzende Betreuung für Kinder: Frauen und Mütter R R R R Familienunterstützende Dienstleistungen: Benchmarking Deutschland: R (Kurzexpertise im Auftrag des Bundesministeriums für Arbeit und Soziales) O O O O Steigende Erwerbsbeteiligung, aber schwierige Übergänge Baustein zur Bewältigung des Fachkräftemangels O Status Quo und Beschäftigungswirkung P Internationale Benchmarking-Studie P E (erstellt für das Bundesministerium für Familie, Senioren, Frauen und Jugend) E (Expertise für die Geschäftsstelle des Zukunftsrats Familie) R RE P RE P RE P R

Werner Eichhorst H H H H Werner Eichhorst (IZA) H Michael J. Kendzia C C C C Werner Eichhorst C Werner Eichhorst (IZA) Werner Eichhorst Eric Thode (Bertelsmann Stiftung) Paul Marx Paul Marx (IZA) Andreas Peichl Verena Tobsch Nico Pestel EA R EA R EA R EA R Verena Tobsch EA R Verena Tobsch (HSU) S S Sebastian Siegloch E E Verena Tobsch R R RE S double wage-earners. This is also clearly married couples is an enormous disincentive RE S RE S February 2008 November 2010 Februar 2011 Juli 2011 Juli 2011 reflected by the labor market participation to work, particularly for women, and should behavior of parents. therefore be abolished in favor of individual taxation with a family component. It’s All About Data: IZA’s International Data Service Center (IDSC)

IZA has always been at the forefront of the Center is a member of the DDI (Data initiative to improve data access for eco- 0 Documentation Initiative) Alliance, nomic science. Operating since 2003, IZA’s which works towards a leading standard International Data Service Center (IDSC) 1 for the technical documentation of social services the data and technology needs science data. of IZA’s resident research community, the various global and virtual IZA research net- IDSC also contributes to the important works and the research community at large. debate on persistent identifiers for the so- cial sciences. A convention for the proper, IDSC develops innovative data products formal and machine-actionable citation for the analysis and documentation of sci- tion gateway, which offers all interested of datasets used in empirical research is entifically relevant data with an emphasis scientists a user-friendly, constantly up- long overdue. This is at complete odds on data support, data access support and dated pool of information on the location, with the situation regarding publications, data analysis for labor economics. IDSC content and access options of datasets where both scholarly and technical con- offers a wide range of databanks and de- that are relevant for labor market research. ventions are well established and widely tailed documentation of existing datasets, used and appreciated. The benefits of such handling not only the data, but also their IZA has developed its own tool for auto- a convention would be enormous in terms legal and ethical aspects. At current IDSC matic or semiautomatic controlled remote of bibliometrics and scientometrics, but provides about 150 datasets for labor eco- data processing (Job Submission Applica- also in terms of allowing the contribution nomics, some of which exclusively. tion/JoSuA). This ensures that all data pro- of data providers and workers to become tection requirements, which often posed more evident. Operating since 2003, IDSC in its original an insurmountable hurdle for international form was the result of an intensive discus- researchers, are met when the dataset Extending the academic mechanisms of sion among a group of German econo- is accessed from anywhere in the world. credit, where credit is due to the data mists, including IZA Director Klaus F. Zim- Meanwhile JoSuA has matured into a flex- world, would help the development of the mermann, about developing a broader data ible instrument of data analysis of configu- field and would in turn provide benefits infrastructure to better serve the scientific rable degree of automation designed to fit for evidence-based social science research. community of national as well as interna- the needs and specifications of each indi- Persistent identifiers of digital and other tional labor economists. Since then several vidual data provider. objects are an important ingredient in this data service centers, of which the only one context. IZA’s International Data Service representing labor economics is IDSC, have IZA cooperates with national and inter- Center will continue to expand its manifold been established in Germany. national institutions in order to establish activities in the field of data documenta- standards for the documentation and tion and analysis. At an early stage a major element of ­IDSC’s analysis of data. Among other commit- activities was the creation of an informa- ments, IZA’s International Data Service  http://idsc.iza.org

10 Institute for the Study of Labor | I Z A COMPACT | March 2013 TESTIMONIALS

What Our Fellows Say About IZA…

“What IZA has accomplished in “Before IZA work in labor “In 15 years, IZA has become a the world of labor economics in its economics was widely dispersed benchmark of academic excellence brief 15 years of existence is al- and scholars often unfamiliar and policy relevance. Through most beyond belief. It has become with the work of others. IZA its fellows network, its working the central institution of labor economics has integrated the field of labor economics papers series, its newly created academic research worldwide, as a consequence of and provided a critical medium for the journals and its awards, IZA is the think its synergistic activities including working promotion and diffusion of research.” tank of reference in labor economics.” papers, visits to IZA in Bonn, top-notch Richard Easterlin Elyès Jouini (Université Paris Dauphine) conferences, and new journals.” (University of Southern California) David Neumark (University of California-Irvine) “Starting from almost nothing, “In a remarkably short time IZA IZA has become a powerhouse in has become a key focal point for labor economics in a very short “IZA has established a truly global labor economics worldwide and an time. Congratulations to IZA and network of leading researchers enormously valuable resource for research.” its founding members for supporting and in labor economics and the disseminating great research.” insights generated from these Richard Blundell leaders in the field have been disseminated (University College London) Edward Lazear (Stanford University) through IZA in a very professional way, thus paving the way for research entering the policy arena and having a true impact.” “It is hard to believe that IZA has “IZA has brought the study of labor only existed for 15 years! In that Matthias Sutter (University of Innsbruck) market polices to the world stage, time, it has really become the cen- and its indefatigable founder, ter for research in labor economics Klaus Zimmermann, has done a in Europe, and helped to raise the profile of “IZA has been an extraordinary great favor for the world’s citizens.” the whole discipline.” achievement, both in its quality Orley Ashenfelter (Princeton University) and in the range of urgent, new Janet Currie (Princeton University) topics it has tackled. It has made a major contribution to economics in Europe.” “We all have to thank IZA not “From a tiny group in 1997 IZA only for its unwavering support Richard Layard has become THE network of labor (London School of Economics) to research and especially young economists worldwide. Uniquely, researchers in Europe, but also it provides a forum for labor for bringing level-headed, careful evidence economists everywhere to exchange ideas.” “It is remarkable how in just 15 to some of the important policy questions years IZA has become so central Daniel Hamermesh facing Europe.” to research and policy in labor (University of Texas at Austin; RHUL) Daron Acemoglu (MIT) economics. It has played a crucial role in building an international community of scholars and in facilitating and advancing “IZA has put Bonn on the map as “Over its short life IZA has deve- cutting-edge research in all the fields associa- a top destination for top labor loped into the major Centre for ted with labor economics.” economists doing policy-relevant the study of labor economics in Francine Blau (Cornell University) work. IZA‘s generous support of Europe. It has challenged and gal- young scholars, its frequent sponsorship of vanized a new cohort of researchers all over productive, high profile conferences, and the world into thinking more deeply about “IZA has quickly become one of its headline-grabbing honors given to young the urgent intellectual and policy issues of the premier networks for applied stars and senior scholars, have served to ca- our times. If it has achieved all this while still economics research in Europe. I talyze excellent research in labor economics only a teenager, what more will it accomplish think of IZA as equivalent to the and to raise the profile of the field in the when it becomes an adult!” National Bureau of Economic Research in broader economics community.” continental Europe, and I am consistently David Autor (MIT) John Van Reenen impressed by the caliber of research that (CEP, London School of Economics) the institute’s affiliates have produced.” Raj Chetty (Harvard University) “IZA’s ‘home base’ in Bonn has become a crossroads for the world‘s “Who’d have thunk it? IZA has leading labor economists. Hardly a widened the scope of labor econo- “Happy anniversary. What a week goes by without a stimulating mics and policy analysis to include difference does 15 years make! talk at the research frontier. Both in-house more researchers, more countries, Research in labor economics has researchers and visitors are lucky to have such and more issues. It has moved from being a truly become a world joint venture, a cornucopia of expertise at their doorstep.” German center to a global center of econo- mic analysis. Wow!” with IZA at the forefront. Congratulations.” Peter Kuhn (University of California, Olivier Blanchard (MIT) Santa Barbara) Richard Freeman (Harvard University)

Institute for the Study of Labor | I Z A COMPACT | March 2013 11 IZA compact

>> Opinion Agenda 2010: Successful Reforms and Policy Advice The 10th anniversary of the “Agenda 2010” labor mar- of counterfactual analysis proved extremely valuable ket reforms – announced by former German Chancel- for the practical implementation of the reform. Thor- lor Gerhard Schröder on March 14, 2003, after many ough scientific evaluation of each reform step was trials and tribulations of his Red-Green government completely unprecedented in the history of German coalition – has drawn a lot of good and important policymaking. This allowed politicians to recognize commentary. But what has been largely ignored in undesired effects early enough to adjust the param- the debate is the influential role of economic research eters of certain policy tools, or discontinue programs and policy advice in this reform process. that had turned out ineffective. Efficiency-based as- sessments of the labor market policy toolset led to a The success of Germany’s labor market moderniza- more effective allocation of public funds. tion program – sometimes admiringly referred to as the new “German model” – is recognized around the In the light of the positive experience with the “Agen- world. I doubt this would have been possible with- da 2010”, politicians and economists also built a out the input provided by independent economic re- new, much more productive relationship than what search, even though one might still deplore that many was previously common in Germany. The long-term recommendations and proposals remained unheard perspective of economic research almost inevitably or got watered down by compromise. clashes with the pragmatic nature of policymaking, which tends to procrastinate until the problem has Sure enough, turning away from Germany’s long- grown to an extent that makes action inescapable. standing labor market, pension and social policy This often results in a poor compromise which causes traditions towards a future-oriented blueprint that new problems. Economists, in turn, are accused of placed a greater emphasis on work incentives, indi- being out of touch with reality and ignoring the ques- vidual responsibility and flexibility carried substan- tion of practical feasibility when making recommen- tial political risks. In many respects the government dations. Klaus F. Zimmermann broke completely new ground in the spring of 2003. This gap has somewhat narrowed in the wake of the Against the background of this political minefield, Agenda 2010. Today it is widely accepted that only the design and implementation of the “Agenda 2010” evidence-based policy advice – as opposed to impul- is a great example of successful interaction between sive political action based on quick expert opinions – practical policymaking and advice based on sound leads to sustainable solutions. Ultimately, excellence economic research. In fact, impact evaluation was an in research is the foundation of internationally com- explicit component of the reform program. petitive policy design. In this context, both politicians and economists have also recognized the benefits of On the one hand, the ambitious reform project ben- a networking strategy for policy advice. IZA’s global efited from a remarkable amount of international research network is the perfect case in point. expertise and exchange of knowledge. “Benchmark- ing” became an almost magic formula. On the other hand, modern labor market research with its method

Institute for the Study of Labor

Editor: Prof. Dr. Klaus F. Zimmermann Managing Editors: Mark Fallak, Holger Hinte Address: IZA, P.O. Box 7240, 53072 Bonn, Germany Phone: +49 (0) 228 - 38 94 223 Fax: +49 (0) 228 - 38 94 510 E-Mail: [email protected] Web: www.iza.org Graphics/Photographs: IZA Printing: Güll GmbH, Lindau Layout: Benedikt Kliche, Thomas Wasilewski

12 InstituteInstitute for for the the Study Study of ofLabor Labor | I| Z I AZ ACOMPACT COMPACT | April| March / May 2013 2006