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Reform of Unemployment Compensation in Germany: A Nonparametric Bounds Analysis Using Register Data

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  • Lee, Sokbae
  • Wilke, Ralf A.

Abstract

Economic theory suggests that an extension of the maximum length of entitlement for unemployment benefits increases the duration of unemployment. Empirical results for the reform of the unemployment compensation system in Germany during the 1980s are less clear. The analysis in this paper is motivated by the controversial empirical findings and by recent developments in econometrics for partial identification. We use extensive administrative data with the drawback that registered unemployment is not directly observed. For this reason we bound the reform effect on unemployment duration over different definitions of unemployment. By exploiting the richness of the data we use a nonparametric approach without imposing critical parametric model assumptions. We identify a systematic increase in unemployment duration in response to the reform in samples that amount to less than 15% of the unemployment spells for the treatment group.

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Bibliographic Info

Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

Volume (Year): 27 (2009)
Issue (Month): 2 ()
Pages: 193-205

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Handle: RePEc:bes:jnlbes:v:27:i:2:y:2009:p:193-205

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  1. Kyyrä, Tomi & Wilke, Ralf A., 2004. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland," ZEW Discussion Papers 04-63, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Xuan, Zhang & Wilke, Ralf A. & Lüdemann, Elke, 2005. "Censored Quantile Regressions and the Length of Unemployment Periods in West Germany," ZEW Discussion Papers 04-57 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
  4. Susan Athey & Guido W. Imbens, 2002. "Identification and Inference in Nonlinear Difference-In-Differences Models," NBER Technical Working Papers 0280, National Bureau of Economic Research, Inc.
  5. repec:att:wimass:9604 is not listed on IDEAS
  6. Bernd Fitzenberger & Ralf A. Wilke, 2010. "Unemployment Durations in West Germany Before and After the Reform of the Unemployment Compensation System during the 1980s," German Economic Review, Verein für Socialpolitik, vol. 11, pages 336-366, 08.
  7. Lechner, Michael, 1996. "Nonparametric bounds on employment and income effects of continuous vocational training in East Germany," ZEW Discussion Papers 96-31, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Bo E. Honoré & Adriana Lleras-Muney, 2004. "Bounds in Competing Risks Models and the War on Cancer," CAM Working Papers 2004-08, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  9. Blundell, Richard & Gosling, Amanda & Ichimura, Hidehiko & Meghir, Costas, 2004. "Changes in the Distribution of Male and Female Wages Accounting for Employment Composition Using Bounds," IZA Discussion Papers 1350, Institute for the Study of Labor (IZA).
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  11. Charles F. Manski, 1997. "Monotone Treatment Response," Econometrica, Econometric Society, vol. 65(6), pages 1311-1334, November.
  12. Hunt, Jennifer, 1995. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Journal of Labor Economics, University of Chicago Press, vol. 13(1), pages 88-120, January.
  13. Bo E. Honore & Adriana Lleras Muney, 2004. "Bounds in Competing Risks Models and the War on Cancer," NBER Working Papers 10963, National Bureau of Economic Research, Inc.
  14. Martin Biewen & Ralf Wilke, 2005. "Unemployment duration and the length of entitlement periods for unemployment benefits: do the IAB employment subsample and the German Socio-Economic Panel yield the same results?," AStA Advances in Statistical Analysis, Springer, vol. 89(2), pages 209-236, June.
  15. Charles F. Manski & John V. Pepper, 1998. "Monotone Instrumental Variables: With an Application to the Returns to Schooling," Virginia Economics Online Papers 308, University of Virginia, Department of Economics.
  16. Manski, Charles F, 1990. "Nonparametric Bounds on Treatment Effects," American Economic Review, American Economic Association, vol. 80(2), pages 319-23, May.
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