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Unemployment Compensation and Wages: Evidence from the German Hartz Reforms

Author

Listed:
  • Arent Stefan

    () (Ifo Institute, Branch Dresden, Einsteinstraße 3, 01069 Dresden, Germany)

  • Nagl Wolfgang

    () (fo Institute, Branch Dresden, Einsteinstraße 3, 01069 Dresden, Germany)

Abstract

Using the introduction of fixed unemployment assistance in Germany in 2005 as a unique natural experiment, we find strong evidence that decreased unemployment compensation has an adverse effect on wages. We use micro panel data to identify and estimate the effect of this structural break. In eastern and western Germany, the relative effect is higher for women. In western Germany, the relative effect increases with skill level. In eastern Germany, there is no clear skill-specific pattern.

Suggested Citation

  • Arent Stefan & Nagl Wolfgang, 2013. "Unemployment Compensation and Wages: Evidence from the German Hartz Reforms," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(4), pages 450-466, August.
  • Handle: RePEc:jns:jbstat:v:233:y:2014:i:4:p:450-466
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    References listed on IDEAS

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    7. McCall, Brian & Chi, Wei, 2008. "Unemployment insurance, unemployment durations and re-employment wages," Economics Letters, Elsevier, vol. 99(1), pages 115-118, April.
    8. Rowthorn, Robert, 1999. "Unemployment, Wage Bargaining and Capital-Labour Substitution," Cambridge Journal of Economics, Oxford University Press, vol. 23(4), pages 413-425, July.
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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.
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    Citations

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    Cited by:

    1. Gadatsch, Niklas & Stähler, Nikolai & Weigert, Benjamin, 2016. "German labor market and fiscal reforms 1999–2008: Can they be blamed for intra-euro area imbalances?," Journal of Macroeconomics, Elsevier, vol. 50(C), pages 307-324.
    2. Gadatsch, Niklas & Stähler, Nikolai & Weigert, Benjamin, 2014. "German labor market and fiscal reforms 1999 to 2008: Can they be blamed for intra-Euro Area imbalances?," Working Papers 05/2014, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    3. Kurt Kratena & Mark Sommer, 2014. "Labour Market Policy and Environmental Fiscal Devaluation: A Cure for Spain in the Aftermath of the Great Recession?," WIFO Working Papers 476, WIFO.
    4. Gianna C. Giannelli & Ursula Jaenichen & Thomas Rothe, 2016. "The evolution of job stability and wages after the implementation of the Hartz reforms
      [Die Entwicklung von Beschäftigungsstabilität und Löhnen seit Einführung der Hartz-Reformen]
      ," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 49(3), pages 269-294, November.
    5. Winker Peter, 2018. "Editorial Announcement," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 238(1), pages 1-1, February.
    6. Ludsteck Johannes & Seth Stefan, 2014. "Comment on ‘‘Unemployment Compensation and Wages: Evidence from the German Hartz Reforms’’ by Stefan Arent and Wolfgang Nagl," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(5), pages 635-644, October.
    7. repec:spr:jlabrs:v:50:y:2017:i:1:d:10.1007_s12651-017-0221-9 is not listed on IDEAS
    8. Regina T. Riphahn & Christoph Wunder, 2016. "State dependence in welfare receipt: transitions before and after a reform," Empirical Economics, Springer, vol. 50(4), pages 1303-1329, June.
    9. Wolfgang Nagl & Michael Weber, 2014. "Unemployment compensation and unemployment duration before and after the German Hartz IV reform," ifo Working Paper Series 186, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    10. Wolfgang Nagl, 2014. "Better Safe than Sorry? The Effects of Income Risk and Unemployment Risk on Wages," LABOUR, CEIS, vol. 28(3), pages 251-268, September.

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    Keywords

    Hartz reforms; unemployment compensation; wages;

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