Thumbscrews for Agencies or for Individuals? How to Reduce Unemployment

37 Pages Posted: 19 Oct 2013

See all articles by Andrey Launov

Andrey Launov

University of Wuerzburg; IZA Institute of Labor Economics

Klaus Wälde

University of Mainz; CESifo (Center for Economic Studies and Ifo Institute); UCL at Louvain la Neuve

Abstract

To which extent does an increase in operating effectiveness of public employment agencies on the one hand and a reduction of unemployment benefits on the other reduce unemployment? Using the recent labour market reform in Germany as background we find that the role of unemployment benefit reduction for the reduction of unemployment is very modest (7% of the observed decline). Enhanced effectiveness of public employment agencies, to the contrary, explains a substantial part (34%) of the observed post-reform unemployment decline. If disincentive effects of PEA reforms had been avoided, the effect could have increased to 51%.

Keywords: employment agencies, unemployment benefits, labour market reform, unemployment, structural model

JEL Classification: E24, J65, J68

Suggested Citation

Launov, Andrey and Wälde, Klaus, Thumbscrews for Agencies or for Individuals? How to Reduce Unemployment. IZA Discussion Paper No. 7659, Available at SSRN: https://ssrn.com/abstract=2342531

Andrey Launov (Contact Author)

University of Wuerzburg ( email )

Sanderring 2
Würzburg, D-97070
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Klaus Wälde

University of Mainz ( email )

Mainz School of Management and Economics
Mainz, 55128
Germany
+49 6131 3920143 (Phone)

HOME PAGE: http://www.waelde.com

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

UCL at Louvain la Neuve

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

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