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Reform of Unemployment Compensation in Germany: A Nonparametric Bounds Analysis Using Register Data

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  • Lee, Sokbae
  • Wilke, Ralf A.

Abstract

Economic theory suggests that an extension of the maximum length of entitlement for unemployment benefits increases the duration of unemployment. Empirical results for the reform of the unemployment compensation system in Germany during the 1980s are less clear. The analysis in this paper is motivated by the controversial empirical findings and by recent developments in econometrics for partial identification. We use extensive administrative data with the drawback that registered unemployment is not directly observed. For this reason we bound the reform effect on unemployment duration over different definitions of unemployment. By exploiting the richness of the data we use a nonparametric approach without imposing critical parametric model assumptions. We identify a systematic increase in unemployment duration in response to the reform in samples that amount to less than 15% of the unemployment spells for the treatment group.
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  • 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.
  • Handle: RePEc:bes:jnlbes:v:27:i:2:y:2009:p:193-205
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    References listed on IDEAS

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    4. Martin Biewen & Ralf Wilke, 2005. "Unemployment duration and the length of entitlement periods for unemployment benefits: do the IAB employment subsample and the German Socio-Economic Panel yield the same results?," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 89(2), pages 209-236, June.
    5. Richard Blundell & Amanda Gosling & Hidehiko Ichimura & Costas Meghir, 2007. "Changes in the Distribution of Male and Female Wages Accounting for Employment Composition Using Bounds," Econometrica, Econometric Society, vol. 75(2), pages 323-363, March.
    6. Tomi Kyyrä & Ralf A. Wilke, 2007. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland," Journal of the European Economic Association, MIT Press, vol. 5(1), pages 154-182, March.
    7. Michael Lechner, 1999. "Nonparametric bounds on employment and income effects of continuous vocational training in East Germany," Econometrics Journal, Royal Economic Society, vol. 2(1), pages 1-28.
    8. Elke Lüdemann & Ralf Wilke & Xuan Zhang, 2006. "Censored quantile regressions and the length of unemployment periods in West Germany," Empirical Economics, Springer, vol. 31(4), pages 1003-1024, November.
    9. 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, August.
    10. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
    11. Susan Athey & Guido W. Imbens, 2006. "Identification and Inference in Nonlinear Difference-in-Differences Models," Econometrica, Econometric Society, vol. 74(2), pages 431-497, March.
    12. Hunt, Jennifer, 1995. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Journal of Labor Economics, University of Chicago Press, vol. 13(1), pages 88-120, January.
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    Cited by:

    1. Arntz, Melanie, 2005. "The Geographical Mobility of Unemployed Workers: Evidence from West Germany," ZEW Discussion Papers 05-34, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Thomas Kruppe & Eva Müller & Laura Wichert & Ralf A. Wilke, 2008. "On the Definition of Unemployment and its Implementation in Regis-ter Data - The Case of Germany," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 128(3), pages 461-488.
    3. Ralf Wilke, "undated". "Unemployment Duration in the United Kingdom: An Incomplete Data Approach," Discussion Papers 09/02, University of Nottingham, School of Economics.
    4. Victor Chernozhukov & Sokbae Lee & Adam M. Rosen, 2013. "Intersection Bounds: Estimation and Inference," Econometrica, Econometric Society, vol. 81(2), pages 667-737, March.
    5. Lo, Simon M.S. & Stephan, Gesine & Wilke, Ralf, 2012. "Estimating the Latent Effect of Unemployment Benefits on Unemployment Duration," IZA Discussion Papers 6650, Institute for the Study of Labor (IZA).
    6. Aretz, Bodo & Gürtzgen, Nicole, 2012. "The Evolution of Wage Mobility in the German Low-Wage Sector - Is There Evidence for Increasing State Dependence?," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62049, Verein für Socialpolitik / German Economic Association.
    7. Boockmann, Bernhard & Steffes, Susanne, 2005. "Individual and Plant-level Determinants of Job Durations in Germany," ZEW Discussion Papers 05-89, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    8. Arntz, Melanie & Wilke, Ralf A. & Winterhager, Henrik, 2006. "Regionenmatching im Rahmen der Evaluation der Experimentierungsklausel des § 6c SGB II: Methodische Vorgehensweise und Ergebnisse," ZEW Discussion Papers 06-061, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    9. Melanie Arntz & Simon Lo & Ralf Wilke, 2014. "Bounds analysis of competing risks: a non-parametric evaluation of the effect of unemployment benefits on migration," Empirical Economics, Springer, vol. 46(1), pages 199-228, February.
    10. Melanie Arntz & Ralf Wilke, 2009. "Unemployment Duration in Germany: Individual and Regional Determinants of Local Job Finding, Migration and Subsidized Employment," Regional Studies, Taylor & Francis Journals, vol. 43(1), pages 43-61.
    11. Stephan Dlugosz & Gesine Stephan & Ralf A. Wilke, "undated". "Fixing the leak: Unemployment incidence before and after the 2006 reform of unemployment benefits in Germany," Discussion Papers 09/10, University of Nottingham, School of Economics.
    12. Melanie Arntz, 2010. "What Attracts Human Capital? Understanding the Skill Composition of Interregional Job Matches in Germany," Regional Studies, Taylor & Francis Journals, vol. 44(4), pages 423-441.
    13. Wooyoung Kim & Koohyun Kwon & Soonwoo Kwon & Sokbae Lee, 2014. "The identification power of smoothness assumptions in models with counterfactual outcomes," CeMMAP working papers CWP17/14, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    14. Fitzenberger, Bernd & Wilke, Ralf A., 2007. "New insights on unemployment duration and post unemployment earnings in Germany: censored Box-Cox quantile regression at work," ZEW Discussion Papers 07-007, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    15. Aretz, Bodo & Gürtzgen, Nicole, 2012. "What Explains the Decline in Wage Mobility in the German Low-Wage Sector?," IZA Discussion Papers 7046, Institute for the Study of Labor (IZA).
    16. 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].
    17. Arntz, Melanie & Lo, Simon M. S. & Wilke, Ralf A., 2007. "Bounds analysis of competing risks : a nonparametric evaluation of the effect of unemployment benefits on migration in Germany," FDZ Methodenreport 200704_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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