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Do German Welfare-to-Work Programmes Reduce Welfare and Increase Work?

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Author Info
Martin Huber ()
Michael Lechner ()
Conny Wunsch ()
Thomas Walter ()

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Abstract

Many Western economies have reformed their welfare systems with the aim of activating welfare recipients by increasing welfare-to-work programmes and job search enforcement. We evaluate the three most important German welfare-to-work programmes implemented after a major reform in January 2005 ("Hartz IV"). Our analysis is based on a unique combination of large scale survey and administrative data that is unusually rich with respect to individual, household, agency level, and regional information. We use this richness to allow for a selection-on-observables approach when doing the econometric evaluation. We find that short-term training programmes on average increase their participants' employment perspectives and that all programmes induce further programme participation. We also show that there is considerable effect heterogeneity across different subgroups of participants that could be exploited to improve the allocation of welfare recipients to the specific programmes and thus increase overall programme effectiveness

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Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2009 with number 2009-03.

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Length: 39 pages
Date of creation: Mar 2009
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Handle: RePEc:usg:dp2009:2009-03

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Related research
Keywords: Welfare-to-work policies; propensity score matching; programme evaluation; panel data; targeting;

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Find related papers by JEL classification:
J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy

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References listed on IDEAS
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  1. Schneider, Julia, 2008. "The effect of unemployment benefit II sanctions on reservation wages," IAB Discussion Paper 200819, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
  2. Jochen Kluve & Christoph M. Schmidt, 2002. "Can training and employment subsidies combat European unemployment?," Economic Policy, CEPR, CES, MSH, vol. 17(35), pages 409-448, October. [Downloadable!] (restricted)
  3. Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series 2001:14, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
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    Other versions:
  5. Card, David & Sullivan, Daniel G, 1988. "Measuring the Effect of Subsidized Training Programs on Movements in and out of Employment," Econometrica, Econometric Society, vol. 56(3), pages 497-530, May. [Downloadable!] (restricted)
    Other versions:
  6. Michael Lechner & Ruth Miquel & Conny Wunsch, 2007. "The Curse and Blessing of Training the Unemployed in a Changing Economy: The Case of East Germany After Unification," German Economic Review, Blackwell Publishing, vol. 8, pages 468-509, November. [Downloadable!] (restricted)
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  7. Wolff, Joachim & Jozwiak, Eva, 2007. "Does short-term training activate means-tested unemployment benefit recipients in Germany?," IAB Discussion Paper 200729, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
  8. Michael Lechner & Conny Wunsch, 2006. "Are Training Programs More Effective When Unemployment Is High?," University of St. Gallen Department of Economics working paper series 2006 2006-23, Department of Economics, University of St. Gallen. [Downloadable!]
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  9. Hohmeyer, Katrin & Wolff, Joachim, 2007. "A fistful of Euros: Does One-Euro-Job participation lead means-tested benefit recipients into regular jobs and out of unemployment benefit II receipt?," IAB Discussion Paper 200732, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
  10. Guido W. Imbens, 2004. "Nonparametric Estimation of Average Treatment Effects Under Exogeneity: A Review," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 4-29, 06. [Downloadable!] (restricted)
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  11. Jacobi, Lena & Kluve, Jochen, 2007. "Before and after the Hartz reforms: The performance of active labour market policy in Germany," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 40(1), pages 45-64. [Downloadable!]
  12. van Ours, Jan C., 2004. "The locking-in effect of subsidized jobs," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 37-55, March. [Downloadable!] (restricted)
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  13. Robert Moffitt, 2002. "Welfare Programs and Labor Supply," NBER Working Papers 9168, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," Econometrica, Econometric Society, vol. 66(5), pages 1017-1098, September.
    Other versions:
  15. Caliendo, Marco & Hujer, Reinhard & Thomsen, Stephan L., 2005. "Identifying effect heterogeneity to improve the efficiency of job creation schemes in Germany," IAB Discussion Paper 200508, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
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  16. Konle-Seidl, Regina & Eichhorst, Werner & Grienberger-Zingerle, Maria, 2007. "Activation policies in Germany : from status protection to basic income support," IAB Discussion Paper 200706, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
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  17. Wolff, Joachim & Nivorozhkin, Anton, 2008. "Start me up: The effectiveness of a self-employment programme for needy unemployed people in Germany," IAB Discussion Paper 200820, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
  18. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
    Other versions:
  19. Alberto Abadie & Guido W. Imbens, 2006. "Large Sample Properties of Matching Estimators for Average Treatment Effects," Econometrica, Econometric Society, vol. 74(1), pages 235-267, 01. [Downloadable!] (restricted)
  20. Conny Wunsch & Michael Lechner, 2008. "What Did All the Money Do? On the General Ineffectiveness of Recent West German Labour Market Programmes," Kyklos, Blackwell Publishing, vol. 61(1), pages 134-174, 02. [Downloadable!] (restricted)
    Other versions:
  21. Lechner, Michael, 2009. "Sequential Causal Models for the Evaluation of Labor Market Programs," Journal of Business & Economic Statistics, American Statistical Association, vol. 27, pages 71-83. [Downloadable!] (restricted)
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