Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/107498
Authors: 
Schmieder, Johannes F.
von Wachter, Till
Bender, Stefan
Year of Publication: 
2014
Series/Report no.: 
IZA Discussion Papers 8700
Abstract: 
This paper estimates the causal effect of long-term unemployment on wages. Job search theory implies that if Unemployment Insurance (UI) extensions do not affect wages conditional on the month of unemployment exit, then reservation wages do not bind on average. Then, UI extensions affect mean wages only through unemployment durations and are valid instrumental variables (IV). Using a regression discontinuity design, we find that UI extensions in Germany reduced job searchers' reemployment wages on average, but did not affect wages conditional on unemployment duration. Resulting IV estimates imply substantial negative effects of unemployment duration on wages of 0.8% per month.
Subjects: 
long-term unemployment
wage losses
unemployment insurance
JEL: 
J64
J65
Document Type: 
Working Paper

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