IDEAS home Printed from https://ideas.repec.org/p/wiw/wiwrsa/ersa12p78.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www-sre.wu.ac.at/ersa/ersaconfs/ersa12/e120821aFinal00080.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John Addison & Mário Centeno & Pedro Portugal, 2009. "Do Reservation Wages Really Decline? Some International Evidence on the Determinants of Reservation Wages," Journal of Labor Research, Springer, vol. 30(1), pages 1-8, March.
    2. Feldstein, Martin & Poterba, James, 1984. "Unemployment insurance and reservation wages," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 141-167.
    3. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-677, October.
    4. Krause, Michael U. & Uhlig, Harald, 2012. "Transitions in the German labor market: Structure and crisis," Journal of Monetary Economics, Elsevier, vol. 59(1), pages 64-79.
    5. 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, February.
    6. Hans-Werner Sinn & Wido Geis & Christian Holzner, 2009. "Die Agenda 2010 und die Armutsgefährdung," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 62(17), pages 23-27, September.
    7. 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.
    8. 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.
    9. Rebien, Martina & Kettner, Anja, 2011. "Die Konzessionsbereitschaft von Bewerbern und Beschäftigten nach den Hartz-Reformen," WSI-Mitteilungen, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 64(5), pages 218-225.
    10. 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.
    11. Ebbinghaus, Bernhard & Eichhorst, Werner, 2006. "Employment Regulation and Labor Market Policy in Germany, 1991-2005," IZA Discussion Papers 2505, Institute of Labor Economics (IZA).
    12. McCall, Brian & Chi, Wei, 2008. "Unemployment insurance, unemployment durations and re-employment wages," Economics Letters, Elsevier, vol. 99(1), pages 115-118, April.
    13. 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.
    14. Kronthaler, Franz, 2003. "A Study of the Competitiveness of Regions based on a Cluster Analysis: The Example of East Germany," IWH Discussion Papers 179/2003, Halle Institute for Economic Research (IWH).
    15. 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.
    16. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wolfgang Nagl, 2014. "Lohnrisiko und Altersarmut im Sozialstaat," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 54.
    2. Arent Stefan & Nagl Wolfgang, 2013. "Unemployment Compensation and Wages: Evidence from the German Hartz Reforms," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(4), pages 450-466, August.
    3. Stefan Arent & Wolfgang Nagl, 2011. "Unemployment Benefit and Wages: The Impact of the Labor Market Reform in Germany on (Reservation) Wages," ifo Working Paper Series 101, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. Matthias S. Hertweck & Oliver Sigrist, 2012. "The Aggregate Effects of the Hartz Reforms in Germany," Working Paper Series of the Department of Economics, University of Konstanz 2012-38, Department of Economics, University of Konstanz.
    5. Seele, Stefanie & Burda, Michael, 2016. "No Role for the Hartz Reforms? Demand and Supply Factors in the German Labor Market, 1993-2014," VfS Annual Conference 2016 (Augsburg): Demographic Change 145650, Verein für Socialpolitik / German Economic Association.
    6. Ehrich, Malte & Munasib, Abdul & Roy, Devesh, 2018. "The Hartz reforms and the German labor force," European Journal of Political Economy, Elsevier, vol. 55(C), pages 284-300.
    7. Carrillo-Tudela, Carlos & Launov, Andrey & Robin, Jean-Marc, 2021. "The fall in german unemployment: A flow analysis," European Economic Review, Elsevier, vol. 132(C).
    8. Lea Immel, 2021. "The Impact of Labor Market Reforms on Income Inequality: Evidence from the German Hartz Reforms," ifo Working Paper Series 347, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    9. Launov, Andrey & Wälde, Klaus, 2016. "The employment effect of reforming a public employment agency," European Economic Review, Elsevier, vol. 84(C), pages 140-164.
    10. Woodcock, Simon D., 2023. "The determinants of displaced workers’ wages: Sorting, matching, selection, and the Hartz reforms," Journal of Econometrics, Elsevier, vol. 233(2), pages 568-595.
    11. Kloß, Michael & Nagl, Wolfgang, 2013. "Unemployment compensation and unemployment duration - Evidence from the German Hartz IV reform," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79711, Verein für Socialpolitik / German Economic Association.
    12. Christian Merkl & Timo Sauerbier, 2024. "Public Employment Agency Reform, Matching Efficiency, and German Unemployment," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(1), pages 393-440, March.
    13. repec:hum:wpaper:sfb649dp2016-010 is not listed on IDEAS
    14. Simon Woodcock, 2022. "The Determinants of Displaced Workers’ Wages: Sorting, Matching, Selection, and the Hartz Reforms," Discussion Papers dp22-04, Department of Economics, Simon Fraser University.
    15. 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.
    16. Michael Stops, 2016. "Revisiting German labour market reform effects—a panel data analysis for occupational labour markets," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-43, December.
    17. repec:zbw:bofrdp:2019_008 is not listed on IDEAS
    18. Bofinger, Peter & Schnabel, Isabel & Feld, Lars P. & Schmidt, Christoph M. & Wieland, Volker, 2015. "Zukunftsfähigkeit in den Mittelpunkt. Jahresgutachten 2015/16 [Focus on Future Viability. Annual Report 2015/16]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201516.
    19. Schmöller, Michaela, 2019. "Stagnant Wages, Sectoral Misallocation and Slowing Productivity Growth," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203598, Verein für Socialpolitik / German Economic Association.
    20. Giannelli, Gianna Claudia & Jaenichen, Ursula & Rothe, Thomas, 2013. "Doing Well in Reforming the Labour Market? Recent Trends in Job Stability and Wages in Germany," IZA Discussion Papers 7580, Institute of Labor Economics (IZA).
    21. repec:hum:wpaper:sfb649dp2017-022 is not listed on IDEAS
    22. Schmöller, Michaela, 2019. "Stagnant wages, sectoral misallocation and slowing productivity growth," Bank of Finland Research Discussion Papers 8/2019, Bank of Finland.
    23. Launov, Andrey & Wälde, Klaus, 2013. "Thumbscrews for Agencies or for Individuals? How to Reduce Unemployment," IZA Discussion Papers 7659, Institute of Labor Economics (IZA).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa12p78. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gunther Maier (email available below). General contact details of provider: http://www.ersa.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.