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Do German Welfare-to-Work Programmes Reduce Welfare and Increase Work?

  • Huber, Martin

    ()

    (University of Fribourg)

  • Lechner, Michael

    ()

    (University of St. Gallen)

  • Wunsch, Conny

    ()

    (University of Basel)

  • Walter, Thomas

    ()

    (ZEW Mannheim)

Many Western economies have reformed their welfare systems with the aim of activating welfare recipients by increasing welfare-to-work programmes and job search enforcement. We evaluate the three most important German welfare-to-work programmes implemented after a major reform in January 2005 ("Hartz IV"). Our analysis is based on a unique combination of large scale survey and administrative data that is unusually rich with respect to individual, household, agency level, and regional information. We use this richness to allow for a selection-on-observables approach when doing the econometric evaluation. We find that short-term training programmes on average increase their participants' employment perspectives and that all programmes induce further programme participation. We also show that there is considerable effect heterogeneity across different subgroups of participants that could be exploited to improve the allocation of welfare recipients to the specific programmes and thus increase overall programme effectiveness.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4090.

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Length: 42 pages
Date of creation: Mar 2009
Date of revision:
Publication status: published as 'Do German Welfare-to-Work Programmes Reduce Welfare Dependency and Increase Employment?' in: German Economic Review, 2011, 12 (2), 182-204
Handle: RePEc:iza:izadps:dp4090
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References listed on IDEAS
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  1. Lechner, Michael & Wunsch, Conny, 2007. "What Did All the Money Do? On the General Ineffectiveness of Recent West German Labour Market Programmes," CEPR Discussion Papers 6306, C.E.P.R. Discussion Papers.
  2. Konle-Seidl, Regina & Eichhorst, Werner & Grienberger-Zingerle, Maria, 2007. "Activation policies in Germany : from status protection to basic income support," IAB Discussion Paper 200706, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  3. Gerfin, Michael & Lechner, Michael, 2000. "Microeconometric Evaluation of the Active Labour Market Policy in Switzerland," IZA Discussion Papers 154, Institute for the Study of Labor (IZA).
  4. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," NBER Working Papers 6699, National Bureau of Economic Research, Inc.
  5. Lechner, Michael, 1999. "Identification and Estimation of Causal Effects of Multiple Treatments Under the Conditional Independence Assumption," IZA Discussion Papers 91, Institute for the Study of Labor (IZA).
  6. Alberto Abadie & Guido W. Imbens, 2006. "Large Sample Properties of Matching Estimators for Average Treatment Effects," Econometrica, Econometric Society, vol. 74(1), pages 235-267, 01.
  7. Lechner, Michael & Miquel, Ruth & Wunsch, Conny, 2005. "The Curse and Blessing of Training the Unemployed in a Changing Economy: The Case of East Germany After Unification," IZA Discussion Papers 1684, Institute for the Study of Labor (IZA).
  8. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," NBER Working Papers 8983, National Bureau of Economic Research, Inc.
  9. van Ours, J.C., 2004. "The locking-in effect of subsidized jobs," Other publications TiSEM c4fd99a1-4c2f-46c6-9ee2-3, Tilburg University, School of Economics and Management.
  10. Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series 2001:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  11. David Card & Daniel Sullivan, 1987. "Measuring the Effect of Subsidized Training Programs on Movements In andOut of Employment," NBER Working Papers 2173, National Bureau of Economic Research, Inc.
  12. Bernhard, Sarah & Hohmeyer, Katrin & Jozwiak, Eva & Koch, Susanne & Kruppe, Thomas & Stephan, Gesine & Wolff, Joachim, 2008. "Aktive Arbeitsmarktpolitik in Deutschland und ihre Wirkungen," IAB-Forschungsbericht 200802, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  13. Joffe, Marshall M. & Ten Have, Thomas R. & Feldman, Harold I. & Kimmel, Stephen E., 2004. "Model Selection, Confounder Control, and Marginal Structural Models: Review and New Applications," The American Statistician, American Statistical Association, vol. 58, pages 272-279, November.
  14. Guido W. Imbens, 2004. "Nonparametric Estimation of Average Treatment Effects Under Exogeneity: A Review," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 4-29, February.
  15. Lechner, Michael, 2009. "Sequential Causal Models for the Evaluation of Labor Market Programs," Journal of Business & Economic Statistics, American Statistical Association, vol. 27, pages 71-83.
  16. Moffitt, Robert A., 2002. "Welfare programs and labor supply," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 34, pages 2393-2430 Elsevier.
  17. Hohmeyer, Katrin & Wolff, Joachim, 2007. "A fistful of Euros: Does One-Euro-Job participation lead means-tested benefit recipients into regular jobs and out of unemployment benefit II receipt?," IAB Discussion Paper 200732, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  18. Jan C. van Ours, 2002. "The Locking-in Effect of Subsidized Jobs," William Davidson Institute Working Papers Series 474, William Davidson Institute at the University of Michigan.
  19. Caliendo, Marco & Hujer, Reinhard & Thomsen, Stephan L., 2005. "Identifying effect heterogeneity to improve the efficiency of job creation schemes in Germany," IAB Discussion Paper 200508, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  20. Lechner, Michael & Wunsch, Conny, 2007. "Are training programs more effective when unemployment is high?," IAB Discussion Paper 200707, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  21. Wolff, Joachim & Nivorozhkin, Anton, 2008. "Start me up: The effectiveness of a self-employment programme for needy unemployed people in Germany," IAB Discussion Paper 200820, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  22. repec:iab:iabzaf:v:40:i:1:p:45-64 is not listed on IDEAS
  23. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
  24. Lechner, Michael & Smith, Jeffrey A., 2003. "What is the Value Added by Caseworkers?," IZA Discussion Papers 728, Institute for the Study of Labor (IZA).
  25. Schneider, Julia, 2008. "The effect of unemployment benefit II sanctions on reservation wages," IAB Discussion Paper 200819, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  26. Lechner, Michael, 1999. "Earnings and Employment Effects of Continuous Off-the-Job Training in East Germany after Unification," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 74-90, January.
  27. Jochen Kluve & Christoph M. Schmidt, 2002. "Can training and employment subsidies combat European unemployment?," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 409-448, October.
  28. Jeffrey Grogger, 2003. "The Effects of Time Limits, the EITC, and Other Policy Changes on Welfare Use, Work, and Income among Female-Headed Families," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 394-408, May.
  29. Wolff, Joachim & Jozwiak, Eva, 2007. "Does short-term training activate means-tested unemployment benefit recipients in Germany?," IAB Discussion Paper 200729, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  30. Michael Lechner, 2002. "Program Heterogeneity And Propensity Score Matching: An Application To The Evaluation Of Active Labor Market Policies," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 205-220, May.
  31. Michael Lechner, 2000. "Programme Heterogeneity and Propensity Score Matching: An Application to the Evaluation of Active Labour Market Policies," Econometric Society World Congress 2000 Contributed Papers 0647, Econometric Society.
  32. 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.
  33. Lechner, Michael, 1995. "Effects of continuous off-the-job training in East Germany after unification," ZEW Discussion Papers 95-27, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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