NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Stefan Bender

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Working Papers

December 2013The Causal Effect of Unemployment Duration on Wages: Evidence from Unemployment Insurance Extensions
with Johannes F. Schmieder, Till von Wachter: w19772
This paper provides quasi-experimental estimates of the causal effect of long-term unemployment on wages. Using standard job search theory, the paper derives and tests conditions on reemployment wages under which Unemployment Insurance (UI) extensions can be used as instrumental variables (IV) for unemployment duration. Using a regression discontinuity design, the paper shows that UI extensions at age thresholds reduced reemployment wages of job searchers in Germany. The UI extensions do not affect the reemployment wages conditional on the month of unemployment exit, implying reservation wages do not bind on average. Hence, UI extensions affect mean wages only through unemployment durations. Our IV estimates imply substantial negative effects of unemployment duration on wages of 0.8% per m...
February 2012The Effects of Extended Unemployment Insurance over the Business Cycle: Evidence from Regression Discontinuity Estimates Over Twenty Years
with Johannes F. Schmieder, Till M. von Wachter: w17813
One goal of extending the duration of unemployment insurance (UI) in recessions is to increase UI coverage in the face of longer unemployment spells. Although it is a common concern that such extensions may themselves raise nonemployment durations, it is not known how recessions would affect the magnitude of this moral hazard. To obtain causal estimates of the differential effects of UI in booms and recessions, this paper exploits the fact that, in Germany, potential UI benefit duration is a function of exact age which is itself invariant over the business cycle. We implement a regression discontinuity design separately for twenty years and correlate our estimates with measures of the business cycle. We find that the nonemployment effects of a month of additional UI benefits are, at best, ...

Published: in Quarterly Journal of Economics. Volume 127, Issue 2, May 2012

The Long-Term Effects of Unemployment Insurance Extensions on Employment
with Johannes F. Schmieder, Till M. von Wachter: w17814
The majority of papers analyzing the employment effects of unemployment insurance (UI) benefit durations focuses on the duration of the first unemployment spell. In this paper, we make two contributions. First, we use a regression discontinuity design to analyze the long-term effects of extensions in UI durations. These estimates differ from standard estimates that they incorporate differences in UI benefit receipt and employment due to recurrent unemployment spells. Second, we derive a welfare formula of UI extensions that incorporates recurrent nonemployment spells. We find that accounting for nonemployment beyond the initial spell leads to a significant reduction in estimates of the nonemployment effect of UI extensions by about 25 percent. We show this effect is only partly explained b...

Published: Schmieder, Johannes F., Till von Wachter, and Stefan Bender. 2012. "The Long-Term Effects of UI Extensions on Employment." American Economic Review, 102(3): 514–19.

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