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Estimating insurance and incentive effects of labour market reforms

Author

Listed:
  • Andrey Launov
  • Irene Schumm
  • Klaus Walde
Abstract
We formulate a general equilibrium matching model with spell-dependent unemployment benefits and endogenous search effort. The model gives rise to an endogenous distribution of unemployment duration characterized by a time-varying hazard function. Using methods from the literature on Semi-Markov processes, we obtain an expression for the aggregate unemployment rate under heterogeneous search effort. We perform structural estimation of the model using a German micro-data set (SOEP) and discuss the effects of the recent unemployment benefit reform (Hartz IV). Our results show that although the reform and economic growth have contributed to the reduction of the aggregate unemployment rate, aggregate welfare has gone down.

Suggested Citation

  • Andrey Launov & Irene Schumm & Klaus Walde, 2008. "Estimating insurance and incentive effects of labour market reforms," CDMA Conference Paper Series 0813, Centre for Dynamic Macroeconomic Analysis.
    • Handle: RePEc:san:cdmacp:0813
    as

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    File URL: https://www.st-andrews.ac.uk/CDMA/papers/cp0813.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Search and Matching Model; Structural Estimation; Unemployment Insurance.;
    All these keywords.

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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