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Unemployment Benefits and Wages: Evidence from the German Hartz-Reform

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  • Wolfgang Nagl
  • Stefan Arent

Abstract

Using the introduction of fixed long-term unemployment benefits in Germany in 2005 as a unique experiment we find strong evidence that lower unemployment benefit has an adverse effect on wages. We use panel data to identify and estimate the effect of this structural break. In western Germany the effect is higher for men and increases with the skill level. In eastern Germany there is no systematic difference between men and women but the negative impact on wages is confirmed.

Suggested Citation

  • Wolfgang Nagl & Stefan Arent, 2012. "Unemployment Benefits and Wages: Evidence from the German Hartz-Reform," ERSA conference papers ersa12p78, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa12p78
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    Cited by:

    1. Wolfgang Nagl & Michael Weber, 2014. "Unemployment compensation and unemployment duration before and after the German Hartz IV reform," ifo Working Paper Series 186, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    2. Ludsteck Johannes & Seth Stefan, 2014. "Comment on ‘‘Unemployment Compensation and Wages: Evidence from the German Hartz Reforms’’ by Stefan Arent and Wolfgang Nagl," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(5), pages 635-644, October.
    3. Kurt Kratena & Mark Sommer, 2014. "Labour Market Policy and Environmental Fiscal Devaluation: A Cure for Spain in the Aftermath of the Great Recession?," WIFO Working Papers 476, WIFO.

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