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Thumbscrews for Agencies or Individuals? How to reduce unemployment

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  • Launov, Andrey
  • Wälde, Klaus

Abstract

To which extent does an increase in effectiveness of a public employment agency on the one hand and a reduction of unemployment benefits on the other reduce unemployment? Using the recent labour market reform in Germany we find that an improved agency explains substantial part of the observed post-reform unemployment decline: 34%. If disincentive effects of the agency reform were avoided, this impact would have become 51%. Contribution of benefit reduction, to the contrary, is modest: 7%. We underline public employment agency as a much more promising target in restructuring welfare states, in contrast to commonly discussed unemployment benefits.

Suggested Citation

  • Launov, Andrey & Wälde, Klaus, 2014. "Thumbscrews for Agencies or Individuals? How to reduce unemployment," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100558, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc14:100558
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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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