1. Discussion: Burda/Hunt Helge Berger

2. In a nutshell A very good and comprehensive paper that takes a look at data, model, and institutions Miracle decomposition 40 percent = expectations 20 percent = wage moderation 40 percent = other – private sector working time accounts – public sector short time work – ?

3. Questions Too narrow look at stylized facts? Asking a lot of expectations? Stress sectoral nature of shock enough? Missing a longer term trend? Coherent story including all relevant institutions?

4. Only DEU vs. US?

5. Boom/bust countries vs. others!

6. (Some qualifications…) Source: Schindler (2011).

7. Expectations over-stressed? Firms first underestimate the resilience of the German economy (explaining ‘underhiring’ prior to the crisis)… …but then are firmly convinced that the “great recession” will be quite short (explaining ‘underfiring’ during the crisis) Too strong assumptions?

8. Sectoral shock under-stressed? For DEU, shock was very specific Would expectations have mattered as much in services sector? Manufacturing – Longer planning horizon – Larger skilled worker constraint – Higher capacity for time accounts

9. Missing an improving trend… *Search model: u_t+1 = u_t (1-a) + (1-u_t) d (w/ d=1/2; u_ss; a) Source: Schindler (2011), Lam (2011) Simulations*

10. …missing employment impact? Counterfactual would be “better” than actual employment figures, leading to a larger notional loss during ‘grand recession’ Estimates: – Pre-crisis unemployment = 7.2 percent – Crisis peak (so far): 7.6 percent – Simulated: about 8.2 percent

11. Missing institutions? Fiscal policy, unions,… Labor courts (B/Danninger 2006; B/Neugart 2011a/b)