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Reform of unemployment compensation in Germany: a nonparametric bounds analysis using register data

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  • Sokbae 'Simon' Lee

    ()
    (Institute for Fiscal Studies and University College London)

  • Ralf A. Wilke

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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File URL: http://cemmap.ifs.org.uk/wps/cwp0205.pdf
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Bibliographic Info

Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP02/05.

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Length: 41 pp.
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:ifs:cemmap:02/05

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Keywords: unemployment duration; definition of unemployment; nonparametric;

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References

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  1. 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).
  2. Charles F. Manski & John V. Pepper, 2000. "Monotone Instrumental Variables, with an Application to the Returns to Schooling," Econometrica, Econometric Society, vol. 68(4), pages 997-1012, July.
  3. 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.
  4. 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.
  5. Lawrence Katz & Bruce Meyer, 1988. "The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment," Working Papers 621, Princeton University, Department of Economics, Industrial Relations Section..
  6. repec:att:wimass:8909 is not listed on IDEAS
  7. Elke Lüdemann & Ralf Wilke & Xuan Zhang, 2006. "Censored quantile regressions and the length of unemployment periods in West Germany," Empirical Economics, Springer, vol. 31(4), pages 1003-1024, November.
  8. Fitzenberger, Bernd & Wilke, Ralf A., 2004. "Unemployment Durations in West-Germany Before and After the Reform of the Unemployment Compensation System During the 1980s," ZEW Discussion Papers 04-24, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Tomi Kyyrä & Ralf Wilke, 2004. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland," Discussion Papers 346, Government Institute for Economic Research Finland (VATT).
  10. Manski, Charles F, 1990. "Nonparametric Bounds on Treatment Effects," American Economic Review, American Economic Association, vol. 80(2), pages 319-23, May.
  11. Jennifer Hunt, 1992. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Discussion Papers of DIW Berlin 50, DIW Berlin, German Institute for Economic Research.
  12. Charles F. Manski, 1997. "Monotone Treatment Response," Econometrica, Econometric Society, vol. 65(6), pages 1311-1334, November.
  13. Biewen, Martin & Wilke, Ralf A., 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?," ZEW Discussion Papers 05-05, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  14. 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.
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Citations

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Cited by:
  1. Aretz, Bodo & Gürtzgen, Nicole, 2012. "What explains the decline in wage mobility in the German low-wage sector?," ZEW Discussion Papers 12-041, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Wilke, Ralf A. & Lo, Simon M. S. & Arntz, Melanie, 2007. "Bounds Analysis of Competing Risks: A Nonparametric Evaluation of the Effect of Unemployment Benefits on Imigration in Germany," ZEW Discussion Papers 07-049, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Fitzenberger, Bernd & Wilke, Ralf A., 2007. "New insights on unemployment duration and post unemployment earnings in Germany: censored Box-Cox quantile regression at work," ZEW Discussion Papers 07-007, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. John P. Haisken-DeNew & Matthias Vorell, 2009. "Killing them with Kindness: Negative Distributional Externalities of Increasing UI Benefits," Ruhr Economic Papers 0121, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  5. Arntz, Melanie, 2005. "The Geographical Mobility of Unemployed Workers: Evidence from West Germany," ZEW Discussion Papers 05-34, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Victor Chernozhukov & Sokbae Lee & Adam M. Rosen, 2013. "Intersection Bounds: Estimation and Inference," Econometrica, Econometric Society, vol. 81(2), pages 667-737, 03.
  7. Aretz, Bodo & Gürtzgen, Nicole, 2012. "The Evolution of Wage Mobility in the German Low-Wage Sector - Is There Evidence for Increasing State Dependence?," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62049, Verein für Socialpolitik / German Economic Association.
  8. Arntz, Melanie & Wilke, Ralf A., 2006. "Unemployment duration in Germany: individual and regional determinants of local job finding, migration and subsidized employment," ZEW Discussion Papers 06-92, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Boockmann, Bernhard & Steffes, Susanne, 2005. "Individual and Plant-level Determinants of Job Durations in Germany," ZEW Discussion Papers 05-89, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. Arntz, Melanie & Wilke, Ralf A. & Winterhager, Henrik, 2006. "Regionenmatching im Rahmen der Evaluation der Experimentierungsklausel des § 6c SGB II: Methodische Vorgehensweise und Ergebnisse," ZEW Discussion Papers 06-61, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. Kruppe, Thomas & Müller, Eva & Wichert, Laura & Wilke, Ralf A., 2007. "On the Definition of Unemployment and its Implementation in Register Data: The Case of Germany," ZEW Discussion Papers 07-041, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  12. Arntz, Melanie & Lo, Simon M. S. & Wilke, Ralf A., 2008. "Bounds analysis of competing risks : a nonparametric evaluation of the effect of unemployment benefits on migration in Germany (Revised version of the FDZ Methodenbericht No. 04/2007)," FDZ Methodenreport 200806_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  13. Arntz, Melanie, 2006. "What attracts human capital? Understanding the skill composition of interregional job matches in Germany," ZEW Discussion Papers 06-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  14. Ralf Wilke, . "Unemployment Duration in the United Kingdom: An Incomplete Data Approach," Discussion Papers 09/02, University of Nottingham, School of Economics.
  15. Lo, Simon M.S. & Stephan, Gesine & Wilke, Ralf, 2012. "Estimating the Latent Effect of Unemployment Benefits on Unemployment Duration," IZA Discussion Papers 6650, Institute for the Study of Labor (IZA).

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