Imposed Benefit Sanctions and the Unemployment-to-Employment Transition: The German Experience

Discussion Papers 792, 29 S.

Kai-Uwe Müller, Viktor Steiner

2008. May.

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We analyze the effect of imposed benefit sanctions on the unemployment-to-employment transition of unemployed people entitled to unemployment compensation on the basis of register data from the German Federal Employment Agency. We combine propensity score matching with a discrete-time hazard rate model which accounts for the dynamic nature of the treatment. We find positive short- and long-term effects of benefit sanctions which are robust for men and women in East and West Germany. The effects diminish with the elapsed unemployment duration until a sanction is imposed. The limited use of benefit sanctions can thus be an effective activation tool if they take place not too late in an individual's unemployment spell.

Kai-Uwe Müller

Leiter der FIS Nachwuchsgruppe Zeitpolitik in the Public Economics Department

JEL-Classification: J64;J65;H31
Keywords: benefit sanctions, unemployment transitions, German labor market reform, ex-post evaluation, propensity score matching, hazard rate model, unobserved heterogeneity
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