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

Author

Listed:
  • Stefan Arent
  • Wolfgang Nagl

Abstract

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.

Suggested Citation

  • Stefan Arent & Wolfgang Nagl, 2011. "Unemployment Benefit and Wages: The Impact of the Labor Market Reform in Germany on (Reservation) Wages," ifo Working Paper Series 101, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
  • Handle: RePEc:ces:ifowps:_101
    as

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    File URL: http://www.cesifo-group.de/DocDL/IfoWorkingPaper-101.pdf
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    References listed on IDEAS

    as
    1. John Addison & Mário Centeno & Pedro Portugal, 2009. "Do Reservation Wages Really Decline? Some International Evidence on the Determinants of Reservation Wages," Journal of Labor Research, Springer, vol. 30(1), pages 1-8, March.
    2. McCall, Brian & Chi, Wei, 2008. "Unemployment insurance, unemployment durations and re-employment wages," Economics Letters, Elsevier, vol. 99(1), pages 115-118, April.
    3. repec:iab:iabzaf:v:40:i:1:p:45-64 is not listed on IDEAS
    4. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-677, October.
    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 257-273, 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. Kronthaler, Franz, 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 (IWH).
    8. 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.
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    Citations

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    Cited by:

    1. Michal Moszynski, 2016. "Institutional conditioning of the German labour market in the face of the global economic crisis 2008–2009," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 15(3), pages 371-383, September.
    2. Beissinger, Thomas & Chusseau, Nathalie & Hellier, Joël, 2015. "Offshoring and labour market reforms: Modelling the German experience," Hohenheim Discussion Papers in Business, Economics and Social Sciences 04-2015, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    3. Rothe, Thomas & Giannelli, Gianna C. & Jaenichen, Ursula, 2013. "Doing well in reforming the labour market? Recent trends in job stability and wages in Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79932, Verein für Socialpolitik / German Economic Association.
    4. Niklas Engbom & Enrica Detragiache & Faezeh Raei, 2015. "The German Labor Market Reforms and Post-Unemployment Earnings," IMF Working Papers 15/162, International Monetary Fund.
    5. Thomas Beissinger & Nathalie Chusseau & Joel Hellier, 2014. "Offshoring, employment, labour market reform and inequality: Modelling the German experience," Working Papers 330, ECINEQ, Society for the Study of Economic Inequality.

    More about this item

    Keywords

    Unemployment benefit; reservation wages; wages.;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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