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Dynamic nonlinear panel models are estimated on the first 14 waves (waves A to N) of the German Socio-Economic Panel to test (among other things) for state dependence effects in male unemployment behaviour. Estimation of the models is based on the maximum likelihood approach. The best model turns out to be the dynamic probit model with equi-correlated disturbances where an individual"s unemployment probability at a given point in time depends on his labour force status in the previous period and which controlls for unobserved population heterogeneity. This model shows that there are strong and significant state dependence effects in individual unemployment as well as significant unobserved heterogeneity of the disturbances. This means, reducing unemployment today will have positive long-term effects on the labour market in the future

This paper provides new estimates of a timevarying NAIRU for Germany taking account of the structural break caused by German unification based on the Kalman Filter and on a partially linear model as two alternatives. Estimating a standard Phillips curve, the sum of coefficients associated with expected inflation is far beyond unity, whatever measure of expected inflation rates is employed. Therefore, either the NAIRU concept is not applicable to Germany or, as it is our suggestion, one estimates the unemployment rate that is compatible with a tolerable inflation rate of say 2 percent following roughly the inflation target put forward by the European Central Bank. The estimates presented in this paper suggest that the NAIRU compatible with 2 percent inflation in Germany is currently around 7 percent if the definition of unemployment follows the concept of the ILO. In contrast to the consensus in the literature, our estimates suggest furthermore that the NAIRU in Germany has not increased since the early 1990's.