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

  • Martin Huber

    ()

  • Michael Lechner

    ()

  • Conny Wunsch

    ()

  • Thomas Walter

    ()

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 Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2009 with number 2009-03.

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Length: 39 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:usg:dp2009:2009-03
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  1. 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.
  2. Card, David & Sullivan, Daniel G, 1988. "Measuring the Effect of Subsidized Training Programs on Movements in and out of Employment," Econometrica, Econometric Society, vol. 56(3), pages 497-530, May.
  3. 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.
  4. Wunsch, Conny & Lechner, Michael, 2007. "What Did All the Money Do? On the General Ineffectiveness of Recent West German Labour Market Programmes," IZA Discussion Papers 2800, Institute for the Study of Labor (IZA).
  5. Guido W. Imbens, 2003. "Nonparametric Estimation of Average Treatment Effects under Exogeneity: A Review," NBER Technical Working Papers 0294, National Bureau of Economic Research, Inc.
  6. 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.
  7. 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.
  8. 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.
  9. 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].
  10. Michael Lechner & Ruth Miquel & Conny Wunsch, 2007. "The Curse and Blessing of Training the Unemployed in a Changing Economy: The Case of East Germany After Unification," German Economic Review, Verein für Socialpolitik, vol. 8, pages 468-509, November.
  11. 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.
  12. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
  13. Michael Lechner & Conny Wunsch, 2009. "Are Training Programs More Effective When Unemployment Is High?," Journal of Labor Economics, University of Chicago Press, vol. 27(4), pages 653-692, October.
  14. Marco Caliendo & Reinhard Hujer & Stephan Thomsen, 2008. "Identifying effect heterogeneity to improve the efficiency of job creation schemes in Germany," Applied Economics, Taylor & Francis Journals, vol. 40(9), pages 1101-1122.
  15. 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.
  16. 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.
  17. Lechner, Michael & Smith, Jeffrey, 2003. "What is the Value Added by Caseworkers?," CEPR Discussion Papers 3825, C.E.P.R. Discussion Papers.
  18. Eichhorst, Werner & Grienberger-Zingerle, Maria & Konle-Seidl, Regina, 2006. "Activation Policies in Germany: From Status Protection to Basic Income Support," IZA Discussion Papers 2514, Institute for the Study of Labor (IZA).
  19. 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].
  20. 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.
  21. repec:iab:iabzaf:v:40:i:1:p:45-64 is not listed on IDEAS
  22. Michael Gerfin & Michael Lechner, 2002. "A Microeconometric Evaluation of the Active Labour Market Policy in Switzerland," Economic Journal, Royal Economic Society, vol. 112(482), pages 854-893, October.
  23. Robert Moffitt, 2002. "Welfare Programs and Labor Supply," NBER Working Papers 9168, National Bureau of Economic Research, Inc.
  24. 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).
  25. 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.
  26. 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.
  27. 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].
  28. 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.
  29. 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.
  30. 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.
  31. 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].
  32. 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.
  33. 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].
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