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Unemployment Benefits and Unemployment Rates of Low-Skilled and Elder Workers in West Germany: A Search Equilibrium Approach

  • Launov, Andrey

    ()

    (University of Mainz)

  • Wolff, Joachim

    ()

    (Institute for Employment Research (IAB), Nuremberg)

  • Klasen, Stephan

    ()

    (University of Göttingen)

In this paper we investigate whether the extension of the entitlement to unemployment benefits in the mid 80s can explain the increase in the unemployment rates of unskilled and elder workers in western Germany. To answer this question we estimate a version of the Burdett-Mortensen search equilibrium model and analyze how workers’ search behaviour responded to these reforms. We try both nonparametric and fully-parametric estimation methods and identify the cases in which the nonparametric approach cannot be applied. We find that the entitlement reforms are largely responsible for the increase of unemployment among unskilled workers.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1161.

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Length: 42 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1161
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  1. Koning, Pierre & Ridder, Geert & van den Berg, Gerard J, 1995. "Structural and Frictional Unemployment in an Equilibrium Search Model with Heterogeneous Agents," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(S), pages S133-51, Suppl. De.
  2. Arnds, Pascal & Bonin, Holger, 2002. "Frühverrentung in Deutschland: Ökonomische Anreize und institutionelle Strukturen," IZA Discussion Papers 666, Institute for the Study of Labor (IZA).
  3. Christensen, B.J. & Jensen, P. & Nielsen, M.S. & Poulsen, K. & Rosholm, M., 1999. "The Equilibrium Search Model with Productivity Dispersion and Structural Unemployment: an Application to Danish Data," Papers 99-12, Centre for Labour Market and Social Research, Danmark-.
  4. Berg, G.J. & Ridder, G., 1993. "An empirical equilibrium search model of the labour market," Serie Research Memoranda 0039, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  5. Bowlus, Audra J & Kiefer, Nicholas M & Neumann, George R, 2001. "Equilibrium Search Models and the Transition from School to Work," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 317-43, May.
  6. Bowlus, Audra J & Kiefer, Nicholas M & Neumann, George R, 1995. "Estimation of Equilibrium Wage Distributions with Heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(S), pages S119-31, Suppl. De.
  7. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  8. Belzil, Christian, 1995. "Unemployment Insurance and Unemployment over Time: An Analysis with Event History Data," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 113-26, February.
  9. Steiner, Viktor, 1997. "Extended benefit entitlement periods and the duration of unemployment in West Germany," ZEW Discussion Papers 97-14, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. Christian Bontemps & Jean-Marc Robin & Gérard J. Van den Berg, 2000. "Equilibrium Search with Continuous Productivity Dispersion: Theory and Nonparametric Estimation," Post-Print hal-00357755, HAL.
  11. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  12. Goffe, William L. & Ferrier, Gary D. & Rogers, John, 1994. "Global optimization of statistical functions with simulated annealing," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 65-99.
  13. 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.
  14. C, Bontemps & Jean-Marc Robin & G, Van Den Berg, 1997. "Equilibrium Search with Productivity Dispersion : Theory and Estimation," Working Papers 97-09, Centre de Recherche en Economie et Statistique.
  15. Jennifer Hunt, 1992. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Discussion Papers of DIW Berlin 50, DIW Berlin, German Institute for Economic Research.
  16. Christian Belzil, 2001. "Unemployment insurance and subsequent job duration: job matching versus unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(5), pages 619-636.
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