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New Insights on Unemployment Duration and Post Unemployment Earnings in Germany: Censored Box-Cox Quantile Regression at Work

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Author Info

  • Fitzenberger, Bernd

    ()
    (University of Freiburg)

  • Wilke, Ralf

    ()
    (University of York)

Abstract

In light of nonstationary search theory (van den Berg, 1990), this paper estimates the effects of benefit entitlement periods and the size of unemployment benefits on unemployment durations and post-unemployment earnings in West Germany. For the unemployment duration, we estimate censored Box-Cox quantile regression, which is robust with respect to the specification of the unobserved error distribution and avoids the common proportional hazard assumption. Our results suggest that the length of benefit entitlement is only of minor importance for the duration of search unemployment and for post unemployment wages. A high wage replacement rate in the low wage sector seems to considerably elongate the duration of unemployment and it is associated with higher post unemployment wages.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2609.

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Length: 43 pages
Date of creation: Feb 2007
Date of revision:
Publication status: published in: Oxford Bulletin of Economics and Statistics, 2010, 72 (6), 794 - 826
Handle: RePEc:iza:izadps:dp2609

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Related research

Keywords: unemployment; Box Cox quantile regression; hazard rate; wage;

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References

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  1. Steiner, Viktor, 1997. "Extended benefit entitlement periods and the duration of unemployment in West Germany," ZEW Discussion Papers 97-14, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Narendranathan, W & Nickell, S & Stern, J, 1985. "Unemployment Benefits Revisited," Economic Journal, Royal Economic Society, vol. 95(378), pages 307-29, June.
  3. 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.
  4. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  5. Wilke, Ralf A. & Fitzenberger, Bernd & Zhang, Xuan, 2004. "A Note on Implementing Box-Cox Quantile Regression," ZEW Discussion Papers 04-61, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Lee, Sokbae & Wilke, Ralf A., 2009. "Reform of Unemployment Compensation in Germany: A Nonparametric Bounds Analysis Using Register Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(2), pages 193-205.
  7. Wilke, Ralf A. & Wichert, Laura, 2005. "Application of a simple nonparametric conditional quantile function estimator in unemployment duration analysis," ZEW Discussion Papers 05-67 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Jose A. F. Machado & Jose Mata, 2000. "Box-Cox quantile regression and the distribution of firm sizes," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(3), pages 253-274.
  9. 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.
  10. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
  11. Portnoy S., 2003. "Censored Regression Quantiles," Journal of the American Statistical Association, American Statistical Association, vol. 98, pages 1001-1012, January.
  12. Bruce Meyer, 2002. "Unemployment and workers' compensation programmes: rationale, design, labour supply and income support ," Fiscal Studies, Institute for Fiscal Studies, vol. 23(1), pages 1-49, March.
  13. Machado, José & Portugal, Pedro & Guimarães, Juliana, 2006. "U.S. Unemployment Duration: Has Long Become Longer or Short Become Shorter?," IZA Discussion Papers 2174, Institute for the Study of Labor (IZA).
  14. Konstantinos Tatsiramos, 2009. "Unemployment Insurance in Europe: Unemployment Duration and Subsequent Employment Stability," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1225-1260, December.
  15. José A. F. Machado & Pedro Portugal, 2002. "Quantile Regression Methods: na Application to U.S. Unemployment Duration," Working Papers w200201, Banco de Portugal, Economics and Research Department.
  16. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
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Citations

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Cited by:
  1. Andrey Launov & Klaus Wälde, 2010. "Estimating Incentive and Welfare Effects of Non-Stationary Unemployment Benefits," CESifo Working Paper Series 3069, CESifo Group Munich.
  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. Wichert, Laura & Wilke, Ralf A., 2005. "Application of a simple nonparametric conditional quantile function estimator in unemployment duration analysis," ZEW Discussion Papers 05-67, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Aysit Tansel & H. Mehmet Tasci, 2009. "Hazard Analysis of Unemployment Duration by Gender in a Developing Country: The Case of Turkey," ERC Working Papers 0903, ERC - Economic Research Center, Middle East Technical University, revised Oct 2009.
  5. Wichert, Laura & Wilke, Ralf A., 2007. "Simple nonparametric estimators for unemployment duration analysis," FDZ Methodenreport 200709_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  6. Haan, Peter & Prowse, Victoria, 2010. "The Design of Unemployment Transfers: Evidence from a Dynamic Structural Life-Cycle Model," IZA Discussion Papers 4792, Institute for the Study of Labor (IZA).
  7. 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].
  8. Mário Centeno & Álvaro A. Novo, 2007. "The Regressivity of Unemployment Insurance: Identification of the Income Effect Through the July 1999 Legislation," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.

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