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Shortening the potential duration of unemployment benefits and labor market outcomes: Evidence from a natural experiment in Germany

Author

Listed:
  • Inna Petrunyk

    (Leuphana University Lueneburg, Germany)

  • Christian Pfeifer

    (Leuphana University Lueneburg, Germany)

Abstract
This paper explores the effects of a major reform of unemployment benefits in Germany on the labor market outcomes of individuals with some health impairment. The reform induced a substantial reduction in the potential duration of regular unemployment benefits for older workers. This work analyzes the reform in a wider framework of institutional interactions, which allows us to distinguish between its intended and unintended effects. Our results provide causal evidence for a significant decrease in the number of days in unemployment benefits and increase in the number of days in employment. However, they also suggest a significant increase in the number of days in unemployment assistance, granted upon exhaustion of unemployment benefits. Transitions to unemployment assistance represent an unintended effect, limiting the success of a policy change that aims to increase labor supply via reductions in the generosity of the unemployment insurance system.

Suggested Citation

  • Inna Petrunyk & Christian Pfeifer, 2018. "Shortening the potential duration of unemployment benefits and labor market outcomes: Evidence from a natural experiment in Germany," Working Paper Series in Economics 377, University of Lüneburg, Institute of Economics.
    • Handle: RePEc:lue:wpaper:377
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Inna Petrunyk & Christian Pfeifer, 2022. "Diverse effects of shorter potential unemployment benefit duration on labor market outcomes in Germany," LABOUR, CEIS, vol. 36(3), pages 367-388, September.
    2. Inna Petrunyk & Christian Pfeifer, 2023. "Potential duration of unemployment benefits and labor market outcomes for older workers with health impairments in Germany," Bulletin of Economic Research, Wiley Blackwell, vol. 75(1), pages 111-118, January.
    3. Camarero Garcia, Sebastian & Murmann, Martin, 2020. "Unemployment benefit duration and startup success," ZEW Discussion Papers 20-033, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    policy evaluation; labor market reform; unemployment insurance; difference-in-differences;
    All these keywords.

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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