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Unemployment Benefit and Wages: The Impact of the Labor Market Reform in Germany on (Reservation) Wages

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  • Stefan Arent
  • Wolfgang Nagl

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Abstract

In this paper, we contribute to the literature on the impact of the unemployment benefit on (reservation) wages. We use the German BA-Employment Panel (2008) to identify the effect of a reduced unemployment benefit due to the labor market reform of 2005 in Germany. Using this unique experiment, we find strong evidence that a lower unemployment benefit has an adverse effect on wages.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-Ifo_Working_Papers/wp-ifo-2011/IfoWorkingPaper-101.pdf
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Bibliographic Info

Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 101.

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Date of creation: 2011
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Handle: RePEc:ces:ifowps:_101

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Keywords: Unemployment benefit; reservation wages; wages.;

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References

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  1. Franz Kronthaler, 2003. "A Study of the Competitiveness of Regions based on a Cluster Analysis: The Example of East Germany," IWH Discussion Papers, Halle Institute for Economic Research 179, Halle Institute for Economic Research.
  2. Topel, Robert H, 1984. "Equilibrium Earnings, Turnover, and Unemployment: New Evidence," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 2(4), pages 500-522, October.
  3. McCall, Brian & Chi, Wei, 2008. "Unemployment insurance, unemployment durations and re-employment wages," Economics Letters, Elsevier, Elsevier, vol. 99(1), pages 115-118, April.
  4. Addison, John T. & Centeno, Mario & Portugal, Pedro, 2008. "Do Reservation Wages Really Decline? Some International Evidence on the Determinants of Reservation Wages," IZA Discussion Papers 3289, Institute for the Study of Labor (IZA).
  5. Harris, Richard D. F. & Tzavalis, Elias, 1999. "Inference for unit roots in dynamic panels where the time dimension is fixed," Journal of Econometrics, Elsevier, Elsevier, vol. 91(2), pages 201-226, August.
  6. repec:iab:iabzaf:v:40:i:1:p:45-64 is not listed on IDEAS
  7. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  8. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 13(4), pages 653-77, October.
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Cited by:
  1. Giannelli, Gianna Claudia & Jaenichen, Ursula & Rothe, Thomas, 2013. "Doing Well in Reforming the Labour Market? Recent Trends in Job Stability and Wages in Germany," IZA Discussion Papers 7580, Institute for the Study of Labor (IZA).
  2. Thomas Beissinger & Nathalie Chusseau & Joel Hellier, 2014. "Offshoring, employment, labour market reform and inequality: Modelling the German experience," Working Papers, ECINEQ, Society for the Study of Economic Inequality 330, ECINEQ, Society for the Study of Economic Inequality.

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