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The Effect of the Hartz Reform on Unemployment Duration and Post-Unemployment Outcomes. A Difference-in-Differences Approach

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In this paper, we investigate the microeconomic effects of one major feature of the German Hartz Reforms (2003-2005), namely the reduction in compensation duration for older unemployed above 45 years of age. We look at two potential effects of this measure: on job take-up rates, but also on post-unemployment outcomes, through various indicators of matching quality (job stability, skill adequacy) and job quality (type of job contract). Applying difference-in-differences estimators, we show that the effects of this specific feature were rather scant. Regarding unemployment duration, only unemployed within a specific age group (55 to 59 years old) were affected by the reform. Evidence suggests that this is because they previously used unemployment schemes as a bridge to early retirement. In addition, there is some evidence of detrimental effects on job or matching quality.

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Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 14020.

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Length: 38 pages
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:mse:cesdoc:14020

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Keywords: Unemployment benefits; unemployment duration; job matching; job quality; early retirement; difference-in-differences.;

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  1. Jan Goebel & Maria Richter, 2007. "Nach der Einführung von Arbeitslosengeld II: deutlich mehr Verlierer als Gewinner unter den Hilfeempfängern," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 74(50), pages 753-761.
  2. Tatsiramos, Konstantinos, 2006. "Unemployment Insurance in Europe: Unemployment Duration and Subsequent Employment Stability," IZA Discussion Papers 2280, Institute for the Study of Labor (IZA).
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  12. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
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  14. 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.
  15. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
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