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Unemployment Benefit and Wages: The Impact of the Labor Market Reform in Germany on (Reservation) Wages

  • Stefan Arent
  • Wolfgang Nagl

In this paper, we contribute to the literature on the impact of the unemployment benefit on (reservation) wages. We use the German BA-Employment Panel (2008) to identify the effect of a reduced unemployment benefit due to the labor market reform of 2005 in Germany. Using this unique experiment, we find strong evidence that a lower unemployment benefit has an adverse effect on wages.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-Ifo_Working_Papers/wp-ifo-2011/IfoWorkingPaper-101.pdf
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Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 101.

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Date of creation: 2011
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Handle: RePEc:ces:ifowps:_101
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  1. Topel, Robert H, 1984. "Equilibrium Earnings, Turnover, and Unemployment: New Evidence," Journal of Labor Economics, University of Chicago Press, vol. 2(4), pages 500-522, October.
  2. Brian McCall & Wei Chi, . "Unemployment Insurance, Unemployment Durations and Re-employment Wages," Working Papers 0306, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
  3. John T. Addison & Mário Centeno & Pedro Portugal, 2008. "Do Reservation Wages Really Decline?: Some International Evidence on the Determinants of Reservation Wages," SOEPpapers on Multidisciplinary Panel Data Research 85, DIW Berlin, The German Socio-Economic Panel (SOEP).
  4. repec:iab:iabzaf:v:40:i:1:p:45-64 is not listed on IDEAS
  5. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  6. Harris, Richard D. F. & Tzavalis, Elias, 1999. "Inference for unit roots in dynamic panels where the time dimension is fixed," Journal of Econometrics, Elsevier, vol. 91(2), pages 201-226, August.
  7. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  8. Franz Kronthaler, 2003. "A Study of the Competitiveness of Regions based on a Cluster Analysis: The Example of East Germany," IWH Discussion Papers 179, Halle Institute for Economic Research.
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