Flexibility in heterogeneous labor markets and implications for economic policy

In 2004, the national and international debate on labor market performance forcefully made a case for more flexibility in the German labor market (OECD 1994, 2004; Heckman 2002; SVR 2002). In contrast, in 2010, experts were surprised by the flexibility of the German labor market during the world recession 2008 and 2009 (Muller 2010). What a change, which did not appear from nowhere. Flexibility has been increasing considering the heterogeneous behavior of labor market groups. The DFG sponsored Priority Program "Flexibility in heterogeneous labor markets" ("Flexibilisierungspotenziale bei heterogenen Arbeitsmarkten"), which ran from 2004 to 2010, analyzed potentials for flexibility in the labor market in light of multifaceted heterogeneity. The purpose of this special issue is to give an overview of research contributions in the Priority Program "Flexibility in heterogeneous labor markets" and to communicate implications for economic policy to a wider audience. This editorial puts the Priority Program into perspective in light of the flexibility debate, describes the activities of the Priority Program, and summarizes the contributions to the special issue.