Germany?s social security system is surveyed, its benefits and contributions are discussed. The expansion of this system in the last decades is described, its impact on employment and growth is studied and proposals for the reform of the system are discussed.

The paper studies the major institutional changes that are at the root of the increase in the west European unemployment rate in the last quartercentury from below 3 percent to 11 percent. The institutional characteristics of wage bargaining, the tax wedge and the legal rules hamper the...