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The Effects of Marginal Employment on Subsequent Labour Market Outcomes

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Author Info

  • Böheim, René

    ()
    (University of Linz)

  • Weber, Andrea

    ()
    (University of Mannheim)

Abstract

We analyse the consequences of starting a wage subsidised job, “marginal employment”, for unemployed workers. Marginal employment is a type of wage subsidy paid to unemployed workers and they do not lose their unemployment benefits if the wage is below a certain threshold. We ask if the unemployed who start marginal jobs face better labour market outcomes than those who do not work. A priori it is not clear if those who work in marginal employment improve their labour market status, e.g. by signalling effort, or worsen it by reduced job search effort. We selected unemployed workers and investigate the effect of marginal employment on their labour market outcomes, by means of propensity score matching. Our results suggest that selection into marginal employment is “negative”, i.e. workers with characteristics we usually associate with low-productivity are more likely to select into such jobs. The unemployed who start to work in marginal employment during their unemployment spell suffer a (causal) penalty for doing so, relative to their peers who do not. The penalty, in terms of less employment, more unemployment, lower wages, lessens over time but is still present after three years.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2221.

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Length: 46 pages
Date of creation: Jul 2006
Date of revision:
Publication status: published in: German Economic Review, 2011, 12 (2), 165 - 181
Handle: RePEc:iza:izadps:dp2221

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Keywords: propensity score matching; marginal employment; atypical employment; labour supply;

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References

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  1. David Card & Jochen Kluve & Andrea Weber, 2009. "Active Labor Market Policy Evaluations – A Meta-analysis," Ruhr Economic Papers 0086, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Michael Fertig & Jochen Kluve & Christoph M. Schmidt, 2005. "Der erweiterte Minijob für Arbeitslose – Ein Reformvorschlag," RWI Materialien, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 38, 01.
  3. Ichino, Andrea & Mealli, Fabrizia & Nannicini, Tommaso, 2006. "From Temporary Help Jobs to Permanent Employment: What Can We Learn from Matching Estimators and their Sensitivity?," CEPR Discussion Papers 5736, C.E.P.R. Discussion Papers.
  4. Lawrence F. Katz, 1996. "Wage Subsidies for the Disadvantaged," NBER Working Papers 5679, National Bureau of Economic Research, Inc.
  5. David Card & Dean R. Hyslop, 2005. "Estimating the Effects of a Time-Limited Earnings Subsidy for Welfare-Leavers," Econometrica, Econometric Society, vol. 73(6), pages 1723-1770, November.
  6. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2000. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," NBER Working Papers 7831, National Bureau of Economic Research, Inc.
  7. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  8. René Böheim & Andrea Weber, 2006. "The effects of marginal employment on subsequent labour market outcomes," Economics working papers 2006-12, Department of Economics, Johannes Kepler University Linz, Austria.
  9. David Autor & Susan Houseman, 2009. "Do Temporary-Help Jobs Improve Labor Market Outcomes for Low-Skilled Workers? Evidence from 'Work First'," Upjohn Working Papers and Journal Articles 05-124, W.E. Upjohn Institute for Employment Research.
  10. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
  11. Julia Angerhausen & Christian Bayer & Burkhard Hehenkamp, 2006. "Strategic Unemployment," Discussion Papers in Economics 06_02, University of Dortmund, Department of Economics.
  12. Chetty, Raj, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Scholarly Articles 9751256, Harvard University Department of Economics.
  13. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones Or Dead Ends?," Economic Journal, Royal Economic Society, vol. 112(480), pages F189-F213, June.
  14. Raj Chetty, 2008. "Erratum: Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1197-1197, December.
  15. Wooldridge, Jeffrey M. & Imbens, Guido, 2009. "Recent Developments in the Econometrics of Program Evaluation," Scholarly Articles 3043416, Harvard University Department of Economics.
  16. Rajeev H. Dehejia & Sadek Wahba, 1998. "Causal Effects in Non-Experimental Studies: Re-Evaluating the Evaluation of Training Programs," NBER Working Papers 6586, National Bureau of Economic Research, Inc.
  17. Michael Kvasnicka, 2008. "Does Temporary Help Work Provide a Stepping Stone to Regular Employment?," NBER Working Papers 13843, National Bureau of Economic Research, Inc.
  18. Phelps, Edmund S, 1994. "Low-Wage Employment Subsidies versus the Welfare State," American Economic Review, American Economic Association, vol. 84(2), pages 54-58, May.
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Cited by:
  1. Helmut Hofer & Andrea Weber, 2006. "Active Labor Market Policy in Austria: Practice and Evaluation Results," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 75(3), pages 155-167.
  2. René Böheim & Andrea Weber, 2006. "The effects of marginal employment on subsequent labour market outcomes," Economics working papers 2006-12, Department of Economics, Johannes Kepler University Linz, Austria.
  3. Freier, Ronny & Steiner, Viktor, 2008. "Marginal employment: Stepping stone or dead end? : evaluating the German experience," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 41(2/3), pages 223-243.
  4. repec:iab:iabzaf:v:41:i:2/3:p:223-243 is not listed on IDEAS
  5. Ronny Freier & Viktor Steiner, 2007. ""Marginal Employment": Stepping Stone or Dead End? Evaluating the German Experience," Discussion Papers of DIW Berlin 744, DIW Berlin, German Institute for Economic Research.
  6. Freier, Ronny & Steiner, Viktor, 2007. "‘Marginal Employment’: Stepping Stone or Dead End? Evaluating the German Experience," IZA Discussion Papers 3175, Institute for the Study of Labor (IZA).

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