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Safety net or helping hand? The effect of job search assistance and compensation on displaced workers

Author

Listed:
  • Fackler, Daniel
  • Stegmaier, Jens
  • Upward, Richard
Abstract
We provide the first systematic evidence on the effectiveness of a contested policy in Germany to help displaced workers. So-called 'transfer companies' (Transfergesellschaften) employ displaced workers for a fixed period, during which time workers are provided with job-search assistance and are paid a wage which is a substantial fraction of their pre-displacement wage. Using rich and accurate data on workers' employment patterns before and after displacement, we compare the earnings and employment outcomes of displaced workers who entered transfer companies with those that did not. Workers can choose whether or not to accept a position in a transfer company, and therefore we use the availability of a transfer company at the establishment level as an IV in a model of one-sided compliance. Using an event study, we find that workers who enter a transfer company have significantly worse post-displacement outcomes, but we show that this is likely to be the result of negative selection: workers who lack good outside opportunities are more likely to choose to enter the transfer company. In contrast, ITT and IV estimates indicate that the use of a transfer company has a positive and significant effect on employment rates five years after job loss, but no significant effect on earnings. In addition, the transfer company provides significant additional compensation to displaced workers in the first 12 months after job loss.

Suggested Citation

  • Fackler, Daniel & Stegmaier, Jens & Upward, Richard, 2023. "Safety net or helping hand? The effect of job search assistance and compensation on displaced workers," IWH Discussion Papers 18/2023, Halle Institute for Economic Research (IWH).
    • Handle: RePEc:zbw:iwhdps:182023
    as

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    References listed on IDEAS

    as
    1. Fackler, Daniel & Stegmaier, Jens & Weigt, Eva, 2019. "Does extended unemployment benefit duration ameliorate the negative employment effects of job loss?," Labour Economics, Elsevier, vol. 59(C), pages 123-138.
    2. Dauth, Wolfgang & Eppelsheimer, Johann, 2020. "Preparing the sample of integrated labour market biographies (SIAB) for scientific analysis," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 54(1), pages 1-10.
    3. Dauth, Wolfgang & Eppelsheimer, Johann, 2020. "Preparing the sample of integrated labour market biographies (SIAB) for scientific analysis," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 54(1), pages .10(1-10).
    4. Johannes F. Schmieder & Till von Wachter & Jörg Heining, 2023. "The Costs of Job Displacement over the Business Cycle and Its Sources: Evidence from Germany," American Economic Review, American Economic Association, vol. 113(5), pages 1208-1254, May.
    5. Fackler, Daniel & Müller, Steffen & Stegmaier, Jens, 2018. "Plant-level employment development before collective displacements: comparing mass layoffs, plant closures and bankruptcies," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 50(50), pages 5416-5435.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    earnings; employment; job loss; transfer companies;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • 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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