Estimating Incentive and Welfare Effects of Non-Stationary Unemployment Benefits

Andrey Launov () and Klaus Wälde

No 4958, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The distribution of unemployment duration in our equilibrium matching model with spell-dependent unemployment benefits displays a time-varying exit rate. Building on Semi-Markov processes, we translate these exit rates into an expression for the aggregate unemployment rate. Structural estimation using a German micro-data set (SOEP) allows us to discuss the effects of a recent unemployment benefit reform (Hartz IV). The reform reduced unemployment by only 0.3%. Contrary to general beliefs, we find that both employed and unemployed workers gain (the latter from an intertemporal perspective). The reason is the rise in the net wage caused by more vacancies per unemployed worker.

Keywords: semi-Markov process; structural estimation; non-stationary unemployment benefits; endogenous effort; matching model (search for similar items in EconPapers)
JEL-codes: C13 E24 J64 J68 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2010-05
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Published - revised version published in: International Economic Review, 2013, 54 (4), 1159-1198

Downloads: (external link)
https://docs.iza.org/dp4958.pdf (application/pdf)

Related works:
Journal Article: ESTIMATING INCENTIVE AND WELFARE EFFECTS OF NONSTATIONARY UNEMPLOYMENT BENEFITS (2013)
Working Paper: Estimating Incentive and Welfare Effects of Non-Stationary Unemployment Benefits (2010)
Working Paper: Estimating Incentive and Welfare Effects of Non-Stationary Unemployment Benefits (2010)
Working Paper: Estimating Incentive and Welfare Effects of Non-stationary Unemployment Benefits (2010)
Working Paper: Estimating Incentive and Welfare Effects of Non-Stationary Unemployment Benefits (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp4958

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().