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Fixing the Leak: Unemployment Incidence before and after a Major Reform of Unemployment Benefits in Germany

Stephan Dlugosz, Gesine Stephan and Ralf Wilke

German Economic Review, 2014, vol. 15, issue 3, 329-352

Abstract: type="main" xml:id="geer12014-abs-0001">

We present first empirical results on the effects of a large scale reduction in unemployment benefit entitlement lengths on unemployment inflows in Germany. We show that this highly disputed element of the Hartz-Reforms in 2006 induced a rush of workers and firms to take advantage of the previous legislation in its last days. Furthermore, we find a considerable decline in transitions to unemployment and an increase in employment rates among older workers after the reform. Our results provide new evidence for the importance of changes in unemployment inflows for the analysis of changes in unemployment outflows.

Date: 2014
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German Economic Review is currently edited by Bernhard Felderer, Joseph F. Francois, Ivo Welch, Urs Schweizer and David E. Wildasin

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