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Marginal Employment, Unemployment Duration and Job Match Quality

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  • Marco Caliendo
  • Steffen Künn
  • Arne Uhlendorff

Abstract

In some countries including Germany unemployed workers can increase their income during job search by taking up "marginal employment" up to a threshold without any deduction from their benefits. Marginal employment can be considered as a wage subsidy as it lowers labour costs for firms owing to reduced social security contributions, and increases work incentives due to higher net earnings. Additional earnings during unemployment might lead to higher reservation wages prolonging the duration of unemployment, yet also giving unemployed individuals more time to search for better and more stable jobs. Furthermore, marginal employment might lower human capital deterioration and raise the job arrival rate due to network effects. To evaluate the impact of marginal employment on unemployment duration and subsequent job quality, we consider a sample of fresh entries into unemployment. Our results suggest that marginal employment leads to more stable post-unemployment jobs, has no impact on wages, and increases the job-finding probability if it is related to previous sectoral experience of the unemployed worker. We find evidence for time-varying treatment effects: whilst there is no significant impact during the first twelve months of unemployment, job finding probabilities increase after one year and the impact on job stability is stronger if the jobs are taken up later within the unemployment spell.

Suggested Citation

  • Marco Caliendo & Steffen Künn & Arne Uhlendorff, 2012. "Marginal Employment, Unemployment Duration and Job Match Quality," Discussion Papers of DIW Berlin 1222, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp1222
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Tom Krebs & Martin Scheffel, 2016. "Structural Reform in Germany," IMF Working Papers 16/96, International Monetary Fund.
    2. Berthold, Norbert & Coban, Mustafa, 2013. "Mini- und Midijobs in Deutschland: Lohnsubventionierung ohne Beschäftigungseffekte?," Discussion Paper Series 119, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    3. Berthold, Norbert & Coban, Mustafa, 2013. "Kombilohn oder Workfare? Wege aus der strukturellen Arbeitslosigkeit auf dem Prüfstand
      [Wage Subsidy or Workfare? Comparison of Two Designs to Reduce Structural Unemployment]
      ," Discussion Paper Series 122, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    4. Lietzmann, Torsten & Schmelzer, Paul & Wiemers, Jürgen, 2016. "Does marginal employment promote regular employment for unemployed welfare benefit recipients in Germany?," IAB Discussion Paper 201618, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    Keywords

    marginal employment; unemployment duration; job search; employment stability; timing of events model;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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