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The strong and sustained labour market upswing in Germany is widely recognized. The relevant literature covers a variety of single reasons. The contribution of our study is to offer a broad set of factors in a unified methodological framework and systematically weigh the candidate reasons against each other on an empirical basis. The candidates are: shocks on the (de)regulation of employment, the efficiency of the matching process, wages, the separations margin, the size of the labour force, technology, cycle and working time per employee. To meet the requirements of our purpose, we specify an SVECM that leaves as many of the systematic interlinkages as possible for empirical determination while operating with a minimal set of restrictions in order to identify the economically meaningful shocks. Identification is achieved by a combination of short- and long-run restrictions based on search-and-matching theory and well-established assumptions on labour force development and technological change.
