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

  • Wolfgang Nagl

    ()

  • Stefan Arent

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.

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File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa12/e120821aFinal00080.pdf
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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa12p78.

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Date of creation: Oct 2012
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Handle: RePEc:wiw:wiwrsa:ersa12p78
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  1. Addison, John T. & Centeno, Mario & Portugal, Pedro, 2008. "Do Reservation Wages Really Decline? Some International Evidence on the Determinants of Reservation Wages," IZA Discussion Papers 3289, Institute for the Study of Labor (IZA).
  2. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  3. repec:iab:iabzaf:v:40:i:1:p:45-64 is not listed on IDEAS
  4. Sabine Klinger & Thomas Rothe, 2012. "The Impact of Labour Market Reforms and Economic Performance on the Matching of the Short‐term and the Long‐term Unemployed," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(1), pages 90-114, 02.
  5. Franz Kronthaler, 2003. "A Study of the Competitiveness of Regions based on a Cluster Analysis: The Example of East Germany," ERSA conference papers ersa03p27, European Regional Science Association.
  6. Franz Kronthaler, 2003. "A Study of the Competitiveness of Regions based on a Cluster Analysis: The Example of East Germany," IWH Discussion Papers 179, Halle Institute for Economic Research.
  7. Harris, Richard D. F. & Tzavalis, Elias, 1999. "Inference for unit roots in dynamic panels where the time dimension is fixed," Journal of Econometrics, Elsevier, vol. 91(2), pages 201-226, August.
  8. Krause, Michael U. & Uhlig, Harald, 2011. "Transitions in the German labor market: Structure and crisis," Discussion Paper Series 1: Economic Studies 2011,34, Deutsche Bundesbank, Research Centre.
  9. Hans-Werner Sinn & Wido Geis & Christian Holzner, 2009. "Die Agenda 2010 und die Armutsgefährdung," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 62(17), pages 23-27, 09.
  10. Martin Feldstein & James M. Poterba, 1984. "Unemployment Insurance and Reservation Wages," NBER Working Papers 1011, National Bureau of Economic Research, Inc.
  11. Topel, Robert H, 1984. "Equilibrium Earnings, Turnover, and Unemployment: New Evidence," Journal of Labor Economics, University of Chicago Press, vol. 2(4), pages 500-522, October.
  12. Ebbinghaus, Bernhard & Eichhorst, Werner, 2006. "Employment Regulation and Labor Market Policy in Germany, 1991-2005," IZA Discussion Papers 2505, Institute for the Study of Labor (IZA).
  13. Brian McCall & Wei Chi, . "Unemployment Insurance, Unemployment Durations and Re-employment Wages," Working Papers 0306, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
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