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 M. von Wachter: w19772
This paper provides estimates of the causal effect of unemployment duration on wages. The paper shows that if the path of reemployment wages throughout the unemployment spell does not shift in response to unemployment insurance (UI) extensions this implies reservation wages do not bind. Under this condition, UI extensions can be used as an instrumental variable (IV) to obtain the average causal effect of unemployment duration among all individuals whose unemployment duration responds to the policy change. UI extensions occurring with exact age in Germany had small but precisely estimated effects on wages, without affecting the path of reemployment wages. The resulting IV estimates yield substantial negative effects of unemployment duration on wages of 0.8% per month. This estimate implies ...
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, ...
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...

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