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Unemployment benefits as a search subsidy: new evidence on duration and wage effects of unemployment insurance

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  • Gangl, Markus
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    Abstract

    Job search models offer two complementary predictions about the effects of unemployment benefits on job search outcomes among unemployed workers. By raising workers’ reservation wages, unemployment benefits should contribute to both prolonged spell duration and improved post-unemployment job quality. In contrast to many previous empirical studies that have addressed the negative benefit effect on duration only, the current paper jointly addresses the causal effect of unemployment benefits on both unemployment duration and post-unemployment wages. Based on panel data from the Survey of Income and Program Participation and the German Socio-Economic Panel for the 1980s and 1990s, the paper establishes empirical support for both benefit effects in both countries. If anything, there is evidence of a slightly more negative duration effect for the U.S. data, while positive UI effects on post-unemployment wages are stronger in the German data. In any event, the empirical estimates for the positive effects of unemployment benefits on wages substantially exceed those obtained in Addison and Blackburn’s recent paper based on Displaced Worker Survey data. In contrast to their findings, the data also provide ample evidence of stronger UI effects in the lower tails of the wage change distribution. At the cost of a fairly small prolongation of unemployment duration, unemployment benefits thus substantially reduce the scar effects of unemployment on workers’ future job records. -- Die Suchtheorie macht zwei komplementäre Vorhersagen über den Einfluß der Arbeitslosenversicherung auf die Dynamik von Arbeitslosigkeit. Indem die Anspruchslöhne der Arbeitslosen erhöht werden, sollte die Arbeitslosenversicherung sowohl zu einer verlängerten Arbeitslosigkeitsdauer als auch zu einem verbesserten Matching bei Wiederbeschäftigung beitragen. Im Gegensatz zu anderen empirischen Studien, die nur den negativen Effekt der Dauer der Arbeitslosigkeit betrachten, werden im vorliegenden DP beide Effekte empirisch untersucht. Auf der Basis des sozio-ökonomischen Panels sowie vergleichbarer Paneldaten des Survey of Income and Program Participation können diese Effekte für beide Arbeitsmärkte empirisch nachgewiesen werden. Im Vergleich sind allenfalls die negativen Dauereffekte der Arbeitslosenversicherung in den USA etwas stärker, während in der Bundesrepublik die positiven Effekte auf die Qualität des Matchings vergleichsweise höher ausfallen. Die geschätzten positiven Lohneffekte wohlfahrtsstaatlicher Transfers liegen insgesamt höher als in der Studie von Addison und Blackburn, die auf Daten des Displaced Worker Survey basierte. Im Gegensatz zu dieser Studie lassen sich auch besonders starke Transfereffekte im unteren Bereich der Lohnveränderungsverteilung nachweisen. Auf Kosten einer geringen Verlängerung der Dauer von Arbeitslosigkeit reduzieren wohlfahrtsstaatliche Transferleistungen folglich die negativen Konsequenzen von Arbeitslosigkeit für den weiteren Erwerbsverlauf.

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    Bibliographic Info

    Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Labor Market Policy and Employment with number FS I 02-208.

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    Date of creation: 2002
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    Handle: RePEc:zbw:wzblpe:fsi02208

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    Related research

    Keywords: Unemployment insurance; unemployment duration; wage change; displaced workers; search theory;

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    References

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    1. Bruce C. Fallick, 1996. "A review of the recent empirical literature on displaced workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 50(1), pages 5-16, October.
    2. Schömann, Klaus & Flechtner, Stefanie & Mytzek, Ralf & Schömann, Isabelle, 2000. "Moving towards employment insurance: unemployment insurance and employment protection in the OECD," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 00-201, Social Science Research Center Berlin (WZB).
    3. 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.
    4. Gregory, Mary & Jukes, Robert, 2001. "Unemployment and Subsequent Earnings: Estimating Scarring among British Men 1984-94," Economic Journal, Royal Economic Society, vol. 111(475), pages F607-25, November.
    5. Blau, David M. & Robins, Philip K., 1986. "Job search, wage offers, and unemployment insurance," Journal of Public Economics, Elsevier, vol. 29(2), pages 173-197, March.
    6. Belzil, Christian, 2000. "Unemployment Insurance and Subsequent Job Duration: Job Matching vs Unobserved Heterogeneity," IZA Discussion Papers 116, Institute for the Study of Labor (IZA).
    7. Mavromaras, Kostas G & Rudolph, Helmut, 1998. "Temporary Separations and Firm Size in the German Labour Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(2), pages 215-25, May.
    8. Katharine G. Abraham & Susan N. Houseman, 1993. "Job Security in America: Lessons from Germany," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number kagsnh1993.
    9. Addison, John T. & Blackburn, McKinley L., 2000. "The effects of unemployment insurance on postunemployment earnings," Labour Economics, Elsevier, vol. 7(1), pages 21-53, January.
    10. Narendranathan, W & Nickell, S & Stern, J, 1985. "Unemployment Benefits Revisited," Economic Journal, Royal Economic Society, vol. 95(378), pages 307-29, June.
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    Cited by:
    1. Konle-Seidl, Regina, 2005. "Lessons learned: Internationale Evaluierungsergebnisse zu Wirkungen aktiver und aktivierender Arbeitsmarktpolitik," IAB-Forschungsbericht 200509, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Eichhorst, Werner & Konle-Seidl, Regina, 2005. "The interaction of labor market regulation and labor market policies in welfare state reform," IAB Discussion Paper 200519, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. repec:iab:iabzaf:v:38:i:2/3:p:383-395 is not listed on IDEAS
    4. Meyer, Wolfgang & Gerlach, Knut, 2005. "Zusammenlegung von Arbeitslosen- und Sozialhilfe: Wirkungen auf Löhne, Beschäftigung und gewerkschaftliche Tarifpolitik (The merging of uneployment assistance and social aissistance * effects on wag," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 383-395.
    5. Gustavo Yamada, 2008. "Reinserción Laboral Adecuada: Dificultades e Implicancias de Política," Working Papers 08-01, Departamento de Economía, Universidad del Pacífico, revised Feb 2008.
    6. Schmelzer, Paul, 2011. "Unemployment and occupational mobility at the beginning of employment career in Germany and the UK," IAB Discussion Paper 201125, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    7. Bernd Fitzenberger & Ralf A. Wilke, 2010. "Unemployment Durations in West Germany Before and After the Reform of the Unemployment Compensation System during the 1980s," German Economic Review, Verein für Socialpolitik, vol. 11, pages 336-366, 08.
    8. Kemmerling, Achim & Bruttel, Oliver, 2005. "New politics in German labour market policy? The implications of the recent Hartz reforms for the German welfare state," Discussion Papers, Research Unit: Labor Market Policy and Employment SP I 2005-101, Social Science Research Center Berlin (WZB).
    9. Breiding, Torsten, 2006. "Die Arbeitslosenversicherung in Deutschland – Beitrag zur Bekämpfung oder Ursache von Arbeitslosigkeit
      [The unemployment insurance in Germany - does it cause or does it help to overcome unemploy
      ," MPRA Paper 20999, University Library of Munich, Germany.

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