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Balleer, Almut, Georg Duernecker, Susanne Forstner & Johannes Goensch (2024): Biased Expectations and Labor Market Outcomes: Evidence from German Survey Data and Implications for the East-West Wage Gap. (Ruhr economic papers 1062), Essen, 80 S. DOI:10.4419/96973232

Abstract

"We measure individual bias in labor market expectations in German survey data and find that workers on average significantly overestimate their individual probabilities to separate from their job when employed as well to find a job when unemployed. These biases vary significantly between population groups. Most notably, East Germans are significantly more pessimistic than West Germans. We find a significantly negative relationship between the pessimistic bias in job separation expectations and wages, and a significantly positive relationship between optimistic bias in job finding expectations and reservation incomes. We interpret and quantify the effects of (such) expectation biases on the labor market equilibrium in a search and matching model of the labor market. Removing the biases could substantially increase wages and expected lifetime income in East Germany. The difference in biases in labor market expectations explains part of the East-West German wage gap" (Author's abstract, IAB-Doku) ((en))

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Illing, Hannah, Johannes F. Schmieder & Simon Trenkle (2024): The Gender Gap in Earnings Losses After Job Displacement. In: Journal of the European Economic Association online erschienen am 13.03.2024, S. 1-41. DOI:10.1093/jeea/jvae019

Abstract

"We compare men and women who are displaced from similar jobs by applying an event study design combined with propensity score matching and reweighting to administrative data from Germany. After a mass layoff, women’ s earnings losses are about 35% higher than men’ s, with the gap persisting five years after displacement. This is partly explained by women taking up more part-time employment, but even women’ s full-time wage losses are almost 50% higher than men’ s. Parenthood magnifies the gender gap sharply. Finally, displaced women spend less time on job search and apply for lower-paid jobs, highlighting the importance of labor supply decisions." (Author's abstract, IAB-Doku, © Oxford Academic) ((en))

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Balgová, Mária & Hannah Illing (2023): Job Displacement and Migrant Labor Market Assimilation. (ECONtribute discussion paper 246), Köln ; Bonn, 68 S.

Abstract

"This paper sheds new light on the barriers to migrants' labor market assimilation. Using administrative data for Germany from 1997-2016, we estimate dynamic difference-in-differences regressions to investigate the relative trajectory of earnings, wages, and employment following mass layoff separately for migrants and natives. We show that job displacement affects the two groups differently even when we systematically control for pre-layoff differences in their characteristics: migrants have on average higher earnings losses, and they find it much more difficult to find employment. However, those who do find a new job experience faster wage growth compared to displaced natives. We examine several potential mechanisms and find that these gaps are driven by labor market conditions, such as local migrant networks and labor market tightness, rather than migrants' behavior." (Author's abstract, IAB-Doku) ((en))

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Bertheau, Antoine, Edoardo Maria Acabbi, Cristina Barceló, Andreas Gulyas, Stefano Lombardi & Raffaele Saggio (2023): The Unequal Consequences of Job Loss across Countries. In: The American economic review. Insights, Jg. 5, H. 3, S. 393-408. DOI:10.1257/aeri.20220006

Abstract

"We document the consequences of losing a job across countries using a harmonized research design applied to seven matched employer-employee datasets. Workers in Denmark and Sweden experience the lowest earnings declines following job displacement, while workers in Italy, Spain, and Portugal experience losses three times as high. French and Austrian workers face earnings losses somewhere in between. Key to these differences is that southern European workers are less likely to find employment following displacement. Loss of employer-specific wage premiums explains a substantial portion of wage losses in all countries." (Author's abstract, IAB-Doku) ((en))

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Blien, Uwe, Jan Mutl, Van Phan thi Hong & Katja Wolf (2023): Wage reactions to regional and national unemployment. In: Regional Science Policy & Practice, Jg. online first accepted manuscript, S. 1-11., 2023-05-02. DOI:10.1111/rsp3.12675

Abstract

"This paper analyses the entire wage effects of unemployment for an especially long observation period. In a three-step approach, the wage reaction at national level (wage setting curve or aggregate wage equation) is added to the reaction at regional level (wage curve). Spatial models with instrumental variables are used." (Author's abstract, IAB-Doku, © Wiley) ((en))

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Caliendo, Marco, Robert Mahlstedt, Aiko Schmeißer & Sophie Wagner (2023): The Accuracy of Job Seekers' Wage Expectations. (arXiv papers), 49 S. DOI:10.48550/arXiv.2309.14044

Abstract

"Job seekers’ misperceptions about the labor market can distort their decision-making and increase the risk of long-term unemployment. Our study establishes objective benchmarks for the subjective wage expectations of unemployed workers. This enables us to provide novel insights into the accuracy of job seekers’ wage expectations. First, especially workers with low objective earnings potential tend to display excessively optimistic beliefs about their future wages and anchor their wage expectations too strongly to their pre-unemployment wages. Second, among long-term unemployed workers, overoptimism remains persistent throughout the unemployment spell. Third, higher extrinsic incentives to search more intensively lead job seekers to hold more optimistic wage expectations, yet this does not translate into higher realized wages for them. Lastly, we document a connection between overoptimistic wage expectations and job seekers’ tendency to overestimate their reemployment chances. We discuss the role of information frictions and motivated beliefs as potential sources of job seekers’ optimism and the heterogeneity in their beliefs." (Author's abstract, IAB-Doku) ((en))

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Elass, Kenza (2023): What do women want in a job? Gender-biased preferences and the reservation wage gap. (French Stata Users' Group Meetings 2023 15), Marseille, 43 S.

Abstract

"Recent explanations of the gender wage gap emphasize the role of gender differences in psychological traits. Nevertheless, there have been only a limited number of studies confirming the relevance of these factors for labor market outcomes. This presentation assesses the role of gender-specific preferences in the reservation wage gap during the job search. I use French administrative data from the unemployment insurance agency providing information on job search behavior and previous outcomes to assess which kind of occupations men and women apply for and the gap in their reservation wages. Employing text analysis, I build a novel dataset classifying occupations with respect to a number of characteristics and examine to which extent men and women differ in the occupation they are looking for. I document widespread gender differences in the occupation characteristics targeted by job seekers. Quantile decomposition methods allow me to document an unequal gap in reservation wage, intensifying along the distribution. After I adjust for occupation characteristics reflecting gender-biased preferences and household constraints, the unexplained part of the reservation wage gap is decreased by half. Investigating unemployment history and outcomes from previous interviews with firms, I do not find evidence of a female risk aversion to previous unemployment shocks or male overconfidence." (Author's abstract, IAB-Doku) ((en))

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Grice, Richard, Victor Hernandez Martinez & Kaixin Liu (2023): Estimating Duration Dependence on Re-employment Wages When Reservation Wages Are Binding. (Working paper / Federal Reserve Bank of Cleveland 2023,21), Cleveland, OH, 51 S. DOI:10.26509/frbc-wp-202321

Abstract

"This paper documents a novel finding indicating that re-employment wages are elastic to the level of unemployment insurance (i.e., a binding reservation wage) and adapts the IV estimator for duration dependence in Schmieder et al. (2016) to account for this fact. Using administrative data from Spain, we find that unemployed workers lower their re-employment wages by 3 percent immediately after the exhaustion of unemployment insurance (UI) benefits. Workers' characteristics and permanent unobserved heterogeneity cannot explain this. To estimate duration dependence, we extend the IV framework proposed by Schmieder et al. (2016), whose estimator of duration dependence is proportional to the response of wages to an extension of the potential duration of UI, to account for the response of reservation wages. We find that while extending the potential duration of UI has an insignificant effect on re-employment wages, duration dependence is strongly negative. We estimate that the degree of duration dependence in Spain is approximately 0.8 percent per month in daily wages. Workers' inability to find full-time jobs as the duration of non-employment increases is an important mechanism behind this effect, since the duration dependence of hourly wages is 0.25 percent per month. Failing to account for the fact that reservation wages are binding would underestimate the magnitude of duration dependence by 15 to 20 percent." (Author's abstract, IAB-Doku) ((en))

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Maibom, Jonas, Nikolaj Harmon, Anita Glenny & Jonas Fluchtmann (2023): Unemployed Job Search across People and over Time: Evidence from Applied-for Jobs. In: Journal of labor economics online erschienen am 06.04.2023, S. 1-40. DOI:10.1086/725165

Abstract

"Using data on applied-for jobs for the universe of Danish UI recipients, we examine variation in job search behavior both across individuals and over time during unemployment spells. We find large differences in the level of applied-for wages across individuals but over time all individuals adjust wages downward in the same way. The decline in applied-for wages over time is descriptively small but economically important in standard models of job search. We find similar results when examining variation in the non-wage characteristics of applied-for jobs and in the search methods used to find them. We discuss implications for theory." (Author's abstract, IAB-Doku) ((en))

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McGee, Andrew & Peter McGee (2023): Gender Differences in Reservation Wages in Search Experiments. (IZA discussion paper / Forschungsinstitut zur Zukunft der Arbeit 16577), Bonn, 26 S.

Abstract

"Women report setting lower reservation wages than men in survey data. We show that women set reservation wages that are 14 to 18 percent lower than men's in laboratory search experiments that control for factors not fully observed in surveys such as offer distributions and outside options. This gender gap—which exists even controlling for overconfidence, preferences, personality, and intelligence—leads women to spend less time searching than men while accepting lower wages. Women—but not men—set reservation wages that are too low relative to theoretically optimal values given their risk preferences early in search, reducing their earnings." (Author's abstract, IAB-Doku) ((en))

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Parsons, Donald O. (2023): How should job displacement wage losses be insured? Wage losses upon re-employment can seriously harm long-tenured displaced workers if they are not properly insured. (IZA world of labor 446), Bonn, 10 S. DOI:10.15185/izawol.446.v2

Abstract

"Job displacement represents a serious earnings risk to long-tenured workers through lower re-employment wages, and these losses may persist for many years. Moreover, this risk is often poorly insured, although not for a lack of policy interest. To reduce this risk, most countries mandate scheduled wage insurance (severance pay), although it is provided only voluntarily in others, including the US. Actual-loss wage insurance is uncommon, although perceived difficulties may be overplayed. Both approaches offer the hope of greater consumption smoothing, with actual-loss plans carrying greater promise, but more uncertainty, of success." (Author's abstract, IAB-Doku) ((en))

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Schmidpeter, Bernhard (2023): Labor Market News and Expectations about Jobs & Earnings. (Working paper / Department of Economics, Johannes Kepler Universität of Linz 2023-14), Linz, 30 S.

Abstract

"Little is known about how workers update expectations about job search and earnings when exposed to labor market news. To identify the impact of news on expectations, I exploit Foxconn's unexpected announcement to build a manufacturing plant in Racine County. Exposure to positive news leads to an increase in expected salary growth at the current firm. Individuals also revise their expectations about outside offers upward, anchoring their beliefs to Foxconn's announced wages. They act on their updated beliefs with a small increase in current consumption. Negative news from a scaled-down plan leads to a revision of expectations back toward baseline." (Author's abstract, IAB-Doku) ((en))

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Audoly, Richard, Federica De Pace & Giulio Fella (2022): Job Ladder, Human Capital, and the Cost of Job Loss. (Staff reports / Federal Reserve Bank of New York 1043), New York, NY, 48 S.

Abstract

"High-tenure workers losing their job experience a large and prolonged fall in wages and earnings. The aim of this paper is to understand and quantify the forces behind this empirical regularity. We propose a structural model of the labor market with (i) on-the-job search, (ii) general human capital, and (iii) firm-specific human capital. Jobs are destroyed at an endogenous rate due to idiosyncratic productivity shocks and the skills of workers depreciate during periods of non-employment. The model is estimated on German Social Security data. By jointly matching moments related to workers’ mobility and wages, the model can replicate the size and persistence of the losses in earnings and wages observed in the data. We find that the loss of a job with a more productive employer is the primary driver of the cumulative wage losses following displacement (about 50 percent), followed by the loss of firm-specific human capital (about 30 percent)." (Author's abstract, IAB-Doku) ((en))

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Azadikhah Jahromi, Afrouz & Brantly Callaway (2022): Heterogeneous Effects of Job Displacement on Earnings. In: Empirical economics, Jg. 62, H. 1, S. 213-245. DOI:10.1007/s00181-020-01961-w

Abstract

"This paper considers how the effect of job displacement varies across different individuals. In particular, our interest centers on features of the distribution of the individual-level effect of job displacement. Identifying features of this distribution is particularly challenging—e.g., even if we could randomly assign workers to be displaced or not, many of the parameters that we consider would not be point identified. We exploit our access to panel data, and our approach relies on comparing outcomes of displaced workers to outcomes the same workers would have experienced if they had not been displaced and if they maintained the same rank in the distribution of earnings as they had before they were displaced. Using data from the Displaced Workers Survey, we find that displaced workers earn about $157 per week less, on average, than they would have earned if they had not been displaced. We also find that there is substantial heterogeneity. We estimate that 42% of workers have higher earnings than they would have had if they had not been displaced and that a large fraction of workers have experienced substantially more negative effects than the average effect of displacement. Finally, we also document major differences in the distribution of the effect of job displacement across education levels, sex, age, and counterfactual earnings levels. Throughout the paper, we rely heavily on quantile regression. First, we use quantile regression as a flexible (yet feasible) first step estimator of conditional distributions and quantile functions that our main results build on. We also use quantile regression to study how covariates affect the distribution of the individual-level effect of job displacement." (Author's abstract, IAB-Doku, © Springer-Verlag) ((en))

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Kesternich, Iris, Heiner Schumacher, Bettina Siflinger & Franziska Valder (2022): Reservation Wages and Labor Supply. In: Journal of Economic Behavior & Organization, Jg. 194, S. 583-607. DOI:10.1016/j.jebo.2021.12.031

Abstract

"Survey measures of the reservation wage may reflect both the consumption-leisure trade-off and job market prospects (the arrival rate of job offers and the wage distribution). We examine what a survey measure of the reservation wage reveals about an individual's willingness to trade leisure for consumption. To this end, we combine the reservation wage measure from a large labor market survey with the reservation wage for a one-hour job that we elicit in an online experiment. The two measures show a strong positive association. For unemployed individuals, the experimental reservation wage increases on average by around one Euro for every Euro increase in the survey measure. For employed individuals, the association between the two measures is weaker and depends on their occupation-specific risk of unemployment. We show that these results are robust to selection into the experiment, and that demographic variables have a similar influence on both reservation wage measures." (Author's abstract, IAB-Doku, © 2022 Elsevier) ((en))

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Marjit, Baisakhi, Sugata Marjit, Kausik Gupta & Saibal Kar (2022): Indignity of Labor: Role of Occupational Prestige in Unemployment. (CESifo working paper 9945), München, 24 S.

Abstract

"Occupational prestige or job status may induce people to remain unemployed even when jobs are available. Thus measured unemployment will always have a voluntary component. Accumulated wealth in a family tends to increase the opportunity cost of job search, more so in a world where job status is socially important. Thus prosperity and unemployment may go hand in hand independent of the standard income effect. The paper shows that measured unemployment always may have a voluntary component. In fact an increase in reservation wage increases voluntary unemployment. However, the impact on the level in involuntary unemployment of such an increase cannot be easily predicted." (Author's abstract, IAB-Doku) ((en))

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Balleer, Almut, Georg Duernecker, Susanne Forstner & Johannes Goensch (2021): The Effects of Biased Labor Market Expectations on Consumption, Wealth Inequality, and Welfare. (CESifo working paper 9326), München, 52 S.

Abstract

"Idiosyncratic labor risk is a prevalent phenomenon with important implications for individual choices. In labor market research it is commonly assumed that agents have rational expectations and therefore correctly assess the risk they face in the labor market. We analyse survey data for the U.S. and document a substantial optimistic bias of households in their subjective expectations about future labor market transitions. Furthermore, we analyze the heterogeneity in the bias across different demographic groups and we find that high-school graduates tend to be strongly over-optimistic about their labor market prospects, whereas college graduates have rather precise beliefs. In the context of a quantitative heterogenous agents life cycle model we show that the optimistic bias has a quantitatively sizable negative effect on the life cycle allocation of income, consumption and wealth and implies a substantial loss in individual welfare compared to the allocation under full information. Moreover, we establish that the heterogeneity in the bias leads to pronounced differences in the accumulation of assets across individuals, and is thereby a quantitatively important driver of inequality in wealth." (Author's abstract, IAB-Doku) ((en))

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Christoph, Bernhard & Torsten Lietzmann (2021): Will Accepting Less Bring Success? Job Related Concessions and Welfare Recipients in Germany. In: The social policy blog H. 22.06.2021.

Abstract

"It is often argued that in order to find new employment, the unemployed have to compromise and accept jobs that are inferior (e.g. paying less or requiring a lower qualification) than the jobs they held before becoming unemployed. Making such compromise to find new employment is what we call a job related concession. Our results show that while there might be some truth to this Assertion - in particular with regard to accepting lower paying Jobs - being generally flexible with regard to job search has comparably positive effects without requiring the unemployed to make such compromise. Therefore, we argue that enabling the unemployed to find new occupational perspectives - ideally in combination with training and qualification measures for the new occupation - should be at least as promising as requiring them to make job-related concessions." (Text excerpt, IAB-Doku) ((en))

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Deschacht, Nick & Sarah Vansteenkiste (2021): The effect of unemployment duration on reservation wages: Evidence from Belgium. In: Labour Economics, Jg. 71. DOI:10.1016/j.labeco.2021.102010

Abstract

"This paper studies the effect of unemployment duration on asking (reservation) wages. We provide new evidence based on unique longitudinal data on unemployed workers in Belgium, who were surveyed about self-reported reservation wages at the start of the unemployment spell, and after 3 and 6 months of unemployment duration. Our estimates suggest that reservation wages decline with unemployment duration by about 0.4 percent per month, or 5 percent per year, and that cross-sectional estimates are biased upward. We find stronger declines among men and among workers who earned high wages in their previous jobs. The paper discusses these findings in the light of learning models and discusses the implications of falling reservation wages for the debate on the effect of unemployment on wages." (Author's abstract, IAB-Doku, © 2021 Elsevier) ((en))

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Fallick, Bruce, John C. Haltiwanger, Erika McEntarfer & Matthew Staiger (2021): Job Displacement and Job Mobility: The Role of Joblessness. (NBER working paper 29187), Cambridge, Mass, 51 S. DOI:10.3386/w29187

Abstract

"Who is harmed by and who benefits from worker reallocation? We investigate the earnings consequences of changing jobs and find a wide dispersion in outcomes. This dispersion is driven not by whether the worker was displaced, but by the duration of joblessness between job spells. Job movers who experience joblessness suffer a persistent reduction in earnings and tend to move to lower-paying firms, suggesting that job ladder models offer a useful lens through which to understand the negative consequences of job separations." (Author's abstract, IAB-Doku) ((en))

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Illing, Hannah, Johannes F. Schmieder & Simon Trenkle (2021): The Gender Gap in Earnings Losses after Job Displacement. (IZA discussion paper 14724), Cambridge, Mass, 51 S., Anhang.

Abstract

"Existing research has shown that job displacement leads to large and persistent earnings losses for men, but evidence for women is scarce. Using administrative data from Germany, we apply an event study design in combination with propensity score matching and a reweighting technique to directly compare men and women who are displaced from similar jobs and firms. Our results show that after a mass layoff, women’s earnings losses are about 35% higher than men’s, with the gap persisting five years after job displacement. This is partly explained by a higher propensity of women to take up part-time or marginal employment following job loss, but even full-time wage losses are almost 50% (or 5 percentage points) higher for women than for men. We then show that on the household level there is no evidence of an added worker effect, independent of the gender of the job loser. Finally, we document that parenthood magnifies the gender gap sharply: while fathers of young children have smaller earnings losses than men in general, mothers of young children have much larger earnings losses than other women." (Author's abstract, IAB-Doku) ((en))

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Illing, Hannah, Johannes F. Schmieder & Simon Trenkle (2021): The Gender Gap in Earnings Losses after Job Displacement. (NBER working paper 29251), Cambridge, Mass, 51 S. DOI:10.3386/w29251

Abstract

"Existing research has shown that job displacement leads to large and persistent earnings losses for men, but evidence for women is scarce. Using administrative data from Germany, we apply an event study design in combination with propensity score matching and a reweighting technique to directly compare men and women who are displaced from similar jobs and firms. Our results show that after a mass layoff, women’s earnings losses are about 35% higher than men’s, with the gap persisting five years after job displacement. This is partly explained by a higher propensity of women to take up part-time or marginal employment following job loss, but even full-time wage losses are almost 50% (or 5 percentage points) higher for women than for men. We then show that on the household level there is no evidence of an added worker effect, independent of the gender of the job loser. Finally, we document that parenthood magnifies the gender gap sharply: while fathers of young children have smaller earnings losses than men in general, mothers of young children have much larger earnings losses than other women." (Author's abstract, IAB-Doku) ((en))

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Lichter, Andreas & Amelie Schiprowski (2020): Benefit Duration, Job Search Behavior and Re-Employment. (CESifo working paper 8194), München, 32 S.

Abstract

"This paper studies how the potential duration of unemployment benefits affects individuals’ job search behavior and re-employment outcomes. We exploit an unexpected reform of the German unemployment insurance scheme in 2008, which increased the potential benefit duration from 12 to 15 months for recipients of age 50 to 54. Based on detailed survey data and difference-in-differences techniques, we estimate that one additional month of benefits reduces the number of filed applications by around 10% on average over the first two months of unemployment. Treatment effects on the reservation wage are positive but statistically insignificant. In a complementary analysis, we use social security data to investigate how the reform affected re-employment outcomes. The difference-in-differences estimates yield an elasticity of 0.24 (0.1) additional months in unemployment (nonemployment) per additional month of potential benefits. A cautious back-of-the-envelope calculation reveals substantial returns to early search effort." (Author's abstract, IAB-Doku) ((en))

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Park, Choonsung (2020): Consumption, reservation wages, and aggregate labor supply. In: Review of Economic Dynamics, Jg. 37, S. 54-80. DOI:10.1016/j.red.2020.01.002

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Kiessling, Lukas, Pia Pinger, Philipp Seegers & Jan Bergerhoff (2019): Gender differences in wage expectations. Sorting, children, and negotiation styles. (IZA discussion paper 12522), Bonn, 50 S.

Abstract

"This paper presents evidence from a large-scale study on gender differences in expected wages before labor market entry. Based on data for over 15,000 students, we document a significant and large gender gap in wage expectations that closely resembles actual wage differences, prevails across subgroups, and along the entire distribution. To understand the underlying causes and determinants, we relate expected wages to sorting into majors, industries, and occupations, child-rearing plans, perceived and actual ability, personality, perceived discrimination, and negotiation styles. Our findings indicate that sorting and negotiation styles affect the gender gap in wage expectations much more than prospective child-related labor force interruptions. Given the importance of wage expectations for labor market decisions, household bargaining, and wage setting, our results provide an explanation for persistent gender inequalities." (Author's abstract, IAB-Doku) ((en))

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Conlon, John, J. Laura Pilossoph, Matthew Wiswall & Basit Zafar (2018): Labor market search with imperfect information and learning. (NBER working paper 24988), Cambrige, Mass., 65 S. DOI:10.3386/w24988

Abstract

"We investigate the role of information frictions in the US labor market using a new nationally representative panel dataset on individuals' labor market expectations and realizations. We find that expectations about future job offers are, on average, highly predictive of actual outcomes. Despite their predictive power, however, deviations of ex post realizations from ex ante expectations are often sizable. The panel aspect of the data allows us to study how individuals update their labor market expectations in response to such shocks. We find a strong response: an individual who receives a job offer one dollar above her expectation subsequently adjusts her expectations upward by $0.47. The updating patterns we document are, on the whole, inconsistent with Bayesian updating. We embed the empirical evidence on expectations and learning into a model of search on- and off- the job with learning, and show that it is far better able to fit the data on reservation wages relative to a model that assumes complete information. The estimated model indicates that workers would have lower employment transition responses to changes in the value of unemployment through higher unemployment benefits than in a complete information model, suggesting that assuming workers have complete information can bias estimates of the predictions of government interventions. We use the framework to gauge the welfare costs of information frictions which arise because individuals make uninformed job acceptance decisions and find that the costs due to information frictions are sizable, but are largely mitigated by the presence of learning." (Author's abstract, IAB-Doku) ((en))

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Fedorets, Alexandra, Alexey Filatov & Cortnie Shupe (2018): Great expectations: reservation wages and the minimum wage reform. (SOEPpapers on multidisciplinary panel data research at DIW Berlin 968), Berlin, 12 S.

Abstract

"We use the German Socio-Economic Panel to show that introducing a high-impact statutory minimum wage causes an increase in reservation wages of approximately 4 percent at the low end of the distribution. The shifts in reservation wages and observed wages due to the minimum wage reform are comparable in their magnitude. Additional results show that German citizens adjust their reservation wages more than immigrants. Moreover, suggestive evidence points to a compensation mechanism in which immigrants trade wage growth against job security." (Author's abstract, IAB-Doku) ((en))

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Hall, Robert E. & Andreas I. Mueller (2018): Wage dispersion and search behavior : The importance of nonwage job values. In: Journal of Political Economy, Jg. 126, H. 4, S. 1594-1637. DOI:10.1086/697739

Abstract

"We use a rich new body of data on the experiences of unemployed job seekers to determine the sources of wage dispersion and to create a search model consistent with the acceptance decisions the job seekers made. We identify the distributions of four key variables: offered wages, offered nonwage job values, job seekers' nonwork alternatives, and job seekers' personal productivities. We find that, conditional on personal productivity, the standard deviation of offered log wages is moderate, at 0.24, whereas the dispersion of the offered nonwage component is substantially larger, at 0.34. The resulting dispersion of offered job values is 0.38." (Author's abstract, IAB-Doku) ((en))

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Jäger, Simon, Benjamin Schoefer, Samuel Young & Josef Zweimüller (2018): Wages and the value of nonemployment. (CESifo working paper 7342), München, 113 S.

Abstract

"Nonemployment is often posited as a worker's outside option in wage setting models such as bargaining and wage posting. The value of this state is therefore a fundamental determinant of wages and, in turn, labor supply and job creation. We measure the effect of changes in the value of nonemployment on wages in existing jobs and among job switchers. Our quasi-experimental variation in nonemployment values arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit levels: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than 0.03. In contrast, a calibrated Nash bargaining model predicts a sensitivity of 0.39 - more than ten times larger. The empirical insensitivity holds even among workers with a priori low bargaining power, with low labor force attachment, with high predicted unemployment duration, among job switchers and recently unemployed workers, in areas of high unemployment, in firms with flexible pay policies, and when considering firmlevel bargaining. The insensitivity of wages to the nonemployment value we document presents a puzzle to widely used wage setting protocols, and implies that nonemployment may not constitute workers' relevant threat point. Our evidence supports wage-setting mechanisms that insulate wages from the value of nonemployment." (Author's abstract, IAB-Doku) ((en))

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Mueller, Andreas I., Johannes Spinnewijn & Giorgio Topa (2018): Job seekers' perceptions and employment prospects. Heterogeneity, duration dependence and bias. (NBER working paper 25294), Cambrige, Mass., 71 S. DOI:10.3386/w25294

Abstract

"This paper analyses job seekers' perceptions and their relationship to unemployment outcomes to study heterogeneity and duration-dependence in both perceived and actual job finding. Using longitudinal data from two comprehensive surveys, we document (1) that reported beliefs have strong predictive power of actual job finding, (2) that job seekers are over-optimistic in their beliefs, particularly the long-term unemployed, and (3) that job seekers do not revise their beliefs downward when remaining unemployed. We then develop a reduced-form statistical framework, where we exploit the joint observation of beliefs and ex-post realizations, to disentangle heterogeneity and duration-dependence in true job finding rates while allowing for elicitation errors and systematic biases in beliefs. We find a substantial amount of heterogeneity in true job finding rates, accounting for more than half of the observed decline in job finding rates over the spell of unemployment. Moreover, job seekers' beliefs are systemically biased and under-respond to differences in job finding rates both across job seekers and over the unemployment spell. Finally, we show theoretically and quantify in a calibrated model of job search how these biases in beliefs contribute to the slow exit out of unemployment. The biases jointly explain about 15 percent of the high incidence of long-term unemployment." (Author's abstract, IAB-Doku) ((en))

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Axelrad, Hila, Israel Luski & Miki Malul (2017): Reservation wages and the unemployment of older workers. In: Journal of labor research, Jg. 38, H. 2, S. 206-227. DOI:10.1007/s12122-017-9247-6

Abstract

"Our purpose is to examine the level of reservation wages among older unemployed (45+), and investigate what happens to the level of reservation wages as the length of unemployment increases. Using data from questionnaires completed by unemployed, we examined the reservation wages of 364 individuals and asked whether they would be willing to compromise in terms of their occupation, profession or geographic location to find a job. 112 of the participants responded to two questionnaires over a three-month period to determine the changes in their expectations over time. Additionally, we conducted qualitative interviews with 10 unemployed. We found that older people experienced longer periods of unemployment, and had a greater willingness to reduce salary expectations. The study establishes an innovative connection between older unemployed, reservation wages and the duration of unemployment, showing that higher reservation wages among older unemployed is the cause of prolonging their unemployment." (Author's abstract, © Springer-Verlag) ((en))

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Beste, Jonas & Mark Trappmann (2017): Analysen zu Stellenbesetzungsproblemen: Konzessionsbereitschaft, Reservationslohn und Suchwege von Arbeitssuchenden. In: IAB-Forum H. 13.07.2017, o. Sz.

Abstract

"Aus Daten des Panels 'Arbeitsmarkt und soziale Sicherung' (PASS) geht hervor, dass viele Arbeitslose verglichen mit Beschäftigten eine hohe Bereitschaft zeigen, bei der Aufnahme einer Erwerbstätigkeit Zugeständnisse zu machen. Sie sind nach eigener Auskunft vor allem dazu bereit, eine Tätigkeit unterhalb des eigenen fachlichen Könnens oder zu ungünstigen Arbeitszeiten anzunehmen. Die Konzessionsbereitschaft hängt dabei stark von der Familiensituation ab. Alleinstehende Arbeitslose weisen gegenüber Personen in anderen Familienkonstellationen zum Beispiel eine höhere Mobilitätsbereitschaft auf." (Autorenreferat, IAB-Doku)

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Constant, Amelie F., Annabelle Krause, Ulf Rinne & Klaus F. Zimmermann (2017): Reservation wages of first- and second-generation migrants. In: Applied Economics Letters, Jg. 24, H. 13, S. 945-949. DOI:10.1080/13504851.2016.1243203

Abstract

"We analyse the reservation wages of first- and second-generation migrants, based on rich survey data of the unemployed in Germany. Our results confirm the hypothesis that reservation wages increase over migrant generations and over time, suggesting that the mobility benefit of immigration may be limited in time." (Author's abstract, IAB-Doku) ((en))

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Fackler, Daniel, Steffen Müller & Jens Stegmaier (2017): Explaining wage losses after job displacement: Employer size and lost firm rents. (IWH-Diskussionspapiere 2017,32), Halle, 46 S.

Abstract

"Why does job displacement, e.g., following import competition, technological change, or economic downturns, result in permanent wage losses? The job displacement literature is silent on whether wage losses after job displacement are driven by lost firm wage premiums or worker productivity depreciations. We therefore estimate losses in wages and firm wage premiums. Premiums are measured as firm effects from a two-way fixed-effects approach, as described in Abowd, Kramarz, and Margolis (1999). Using German administrative data, we find that wage losses are, on average, fully explained by losses in firm wage premiums and that premium losses are largely permanent. We show that losses in wages and premiums are minor for workers displaced from small plants and strongly increase with pre-displacement firm size, which provides an explanation for the large and persistent wage losses that have been found in previous studies mostly focusing on displacement from large employers." (Autorenreferat, IAB-Doku)

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Le Barbanchon, Thomas, Roland Rathelot & Alexandra Roulet (2017): Unemployment insurance and reservation wages. Evidence from administrative data. (NBER working paper 23406), Cambrige, Mass., 38 S. DOI:10.3386/w23406

Abstract

"Although the reservation wage plays a central role in job search models, empirical evidence on the determinants of reservation wages, including key policy variables such as unemployment insurance (UI), is scarce. In France, unemployed people must declare their reservation wage to the Public Employment Service when they register to claim UI benefits. We take advantage of these rich French administrative data and of a reform of UI rules to estimate the effect of the potential benefit duration (PBD) on reservation wages and on other dimensions of job selectivity, using a difference-in-difference strategy. We cannot reject that the elasticity of the reservation wage with respect to PBD is zero. Our results are precise and we can rule out elasticities larger than 0.006. Furthermore, we do not find any significant effects of PBD on the desired number of hours, duration of labor contract and commuting time/distance. The estimated elasticity of actual benefit duration with respect to PBD of 0.3 is in line with the consensus in the literature. Exploiting a regression discontinuity design as an alternative identification strategy, we find similar results." (Author's abstract, IAB-Doku) ((en))

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Scheve, Christian von, Frederike Esche & Jürgen Schupp (2017): The emotional timeline of unemployment. Anticipation, reaction, and adaptation. In: Journal of happiness studies, Jg. 18, H. 4, S. 1231-1254. DOI:10.1007/s10902-016-9773-6

Abstract

"Unemployment continues to be one of the major challenges in industrialized societies. Aside from its economic and societal repercussions, questions concerning the subjective experience of unemployment have recently attracted increasing attention. Although existing studies have documented the detrimental effects of unemployment for cognitive (life satisfaction) and affective well-being, studies directly comparing these two dimensions of subjective well-being and their temporal dynamics in anticipation of and response to unemployment are absent from the literature. Using longitudinal data of the German Socio-Economic Panel (SOEP) and applying fixed effects regressions, we investigate changes in cognitive and affective well-being prior to and after job loss. Extending previous studies, we use discrete emotion measures instead of affect balance indicators to assess affective well-being. Our results support existing findings that unemployment leads to decreases in life satisfaction and that the unemployed do not adapt towards previous levels of life satisfaction. We also find that individuals more often experience sadness and anxiety, and less often happiness when transitioning into unemployment. Importantly, changes in affective well-being are less enduring compared to the changes in life satisfaction." (Author's abstract, IAB-Doku) ((en))

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Soerensen, Kenneth Lykke (2017): Active labour market programmes and reservation wages. It is a hazard. In: Applied Economics Letters, Jg. 24, H. 9, S. 589-593. DOI:10.1080/13504851.2016.1213358

Abstract

"This article uses a randomized controlled trial to show that positive earnings effects of a labour market programme can be caused by either a faster return to employment together with a lowering of reservation wages or a more moderate return to employment together with an increase in reservation wages. I model wages and unemployment duration simultaneously in a hazard framework allowing for unobserved heterogeneity." (Author's abstract, IAB-Doku) ((en))

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Alonso-Borrego, César & Antonio Romero-Medina (2016): Wage expectations for higher education students in Spain. In: Labour, Jg. 30, H. 1, S. 1-17. DOI:10.1111/labr.12072

Abstract

"We assess students' ability to forecast future earnings by using data on expected wages self-reported by college students with different graduation horizons. We find a significant gender gap, by which wage expectations are systematically lower for women than for men. However, women do not fully account for the gender gap in their future earnings. We also find that student performance, degree type, and graduation horizon play a relevant role in wage forecasts. In any case, students' expectations do not conform market wages but become more realistic as they approach graduation." (Author's abstract, Published by arrangement with John Wiley & Sons) ((en))

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Bauer, Anja (2016): Reallocation patterns across occupations in Germany. In: Economics Letters, Jg. 148, H. November, S. 111-114., 2016-09-11. DOI:10.1016/j.econlet.2016.09.008

Abstract

"Using high-quality German administrative data, I analyze workers' opportunity costs of reallocation across occupations by measuring the additional time spent in unemployment before being hired in a new occupation. Furthermore, I inspect the wage changes after reallocation and find that workers who change occupations through unemployment face wage losses that appear to be persistent over a 5-year horizon." (Author's abstract, © 2016 Elsevier) ((en))

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Cardoso, Ana Rute, Annalisa Loviglio & Lavinia Piemontese (2016): Misperceptions of unemployment and individual labor market outcomes. In: IZA journal of labor policy, Jg. 5, S. 1-22. DOI:10.1186/s40173-016-0069-6

Abstract

"We analyze the impact of misperceptions of the unemployment rate on individual wages, using the European Social Survey. We follow a threefold strategy to tackle potential endogeneity problems, as the model includes the following: controls for worker's ability, the regional unemployment rate, and country fixed effects. We estimate interval regression models. When subjective perceptions overstate the country unemployment rate, a one percentage point gap between the perceived and the actual rates reduces wages by 0.4 to 0.7 %. We discuss a potential mechanism. A pessimistic view of the labor market leads to concern over own employment prospects, lowering perceived bargaining power and reservation wages." (Author's abstract, IAB-Doku) ((en))

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Krueger, Alan B. & Andreas I. Mueller (2016): A contribution to the empirics of reservation wages. In: American Economic Journal. Economic Policy, Jg. 8, H. 1, S. 142-179. DOI:10.1257/pol.20140211

Abstract

"This paper provides evidence on the behavior of reservation wages over the spell of unemployment, using high-frequency longitudinal data on unemployed workers in New Jersey. In comparison to a calibrated job search model, the reservation wage starts out too high and declines too slowly, on average, suggesting that many workers persistently misjudge their prospects or anchor their reservation wage on their previous wage. The longitudinal nature of the data also allows for testing the relationship between job acceptance and the reservation wage, where the reservation wage is measured from a previous interview to avoid bias due to cognitive dissonance." (Author's abstract, IAB-Doku) ((en))

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Schmieder, Johannes F., Till von Wachter & Stefan Bender (2016): The effect of unemployment benefits and nonemployment durations on wages. In: The American economic review, Jg. 106, H. 3, S. 739-777., 2015-12-31. DOI:10.1257/aer.20141566

Abstract

"We estimate that unemployment insurance (UI) extensions reduce reemployment wages using sharp age discontinuities in UI eligibility in Germany. We show this effect combines two key policy parameters: the effect of UI on reservation wages and the effect of nonemployment durations on wage offers. Our framework implies if UI extensions do not affect wages conditional on duration, then reservation wages do not bind. We derive resulting instrumental variable estimates for the effect of nonemployment durations on wage offers and bounds for reservation wage effects. The effect of UI on wages we find arises mainly from substantial negative nonemployment duration effects." (Author's abstract, IAB-Doku) ((en))

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Hall, Robert E. & Andreas I. Mueller (2015): Wage dispersion and search behavior. (IZA discussion paper 9527), Bonn, 55 S.

Abstract

"We use a rich new body of data on the experiences of unemployed job-seekers to determine the sources of wage dispersion and to create a search model consistent with the acceptance decisions the job-seekers made. From the data and the model, we identify the distributions of four key variables: offered wages, offered non-wage job values, the value of the job-seeker's non-work alternative, and the job-seeker's personal productivity. We find that, conditional on personal productivity, the dispersion of offered wages is moderate, accounting for 21 percent of the total variation in observed offered wages, whereas the dispersion of the non-wage component of offered job values is substantially larger. We relate our findings to an influential recent paper by Hornstein, Krusell, and Violante who called attention to the tension between the fairly high dispersion of the values job-seekers assign to their job offers - which suggest a high value to sampling from multiple offers - and the fact that the job-seekers often accept the first offer they receive." (Author's abstract, IAB-Doku) ((en))

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Sørensen, Kenneth Lykke (2015): Active labor market programs and reservation wages. Its a hazard. (University Aarhus. Economics working paper 2015-27), Aarhus, 10 S.

Abstract

"Using a randomized controlled trial, this paper shows that positive earnings effects of labor market programs might be driven by an employment and/or a wage effect. The findings of this paper suggest that treated individuals in a high-intense scheme are more prone to have lowered short- term reservation wages compared to non-treated and thus accepts lower wages. In a less intense scheme with use of private providers, treated individuals are more likely to have gained formal human capital accumulation, and thereby raised reservation wages, which again might give rise to long-lasting effects." (Author's abstract, IAB-Doku) ((en))

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Tao, Hung-Lin (2015): Multiple earnings comparisons and subjective earnings fairness. A cross-country study. In: Journal of Behavioral and Experimental Economics, Jg. 57, H. August, S. 45-54. DOI:10.1016/j.socec.2015.04.002

Abstract

"Earnings comparisons are defined by the earnings differential within the same social class, the parallel comparison, and the longitudinal comparison, which consists of the upward and downward comparisons. These three types of earnings comparisons are direct and significant determinants of the perception of earnings fairness. The influences of these three types of earnings comparisons on fairness perception vary with societal characteristics, such as the degree of corruption, income inequality, and unemployment. Of these three types of earnings comparisons, the group upward comparison is the most malleable to societal characteristics. Past studies on earnings fairness cannot explain workers' strong feelings of injustice in the most recent recession, in which the unemployment rate has been high, but the strong feelings of injustice can be explained by the group upward comparison in this study." (Author's abstract, IAB-Doku) ((en))

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Weber, Christoph S. & Philipp Dees (2015): Anspruchslöhne. Immer noch Unterschiede zwischen Ost und West. In: WSI-Mitteilungen, Jg. 68, H. 8, S. 593-603. DOI:10.5771/0342-300X-2015-8-593

Abstract

"Fast 25 Jahren nach der Wiedervereinigung gibt es weiterhin einen signifikanten Unterschied zwischen den Löhnen, die West- und Ostdeutsche mindestens erwarten, um eine offene Stelle anzunehmen. D.h. es gibt nicht nur ein nach wie vor bestehendes Lohngefälle zwischen West- und Ostdeutschland, sondern auch die Anspruchslöhne sind im Osten geringer. Dieser Unterschied besteht, wie die vorgelegte Analyse zeigt, auch dann noch, wenn für eine Vielzahl von Einflussfaktoren auf die Lohnerwartung, wie bspw. die sektorale und qualifikatorische Zusammensetzung oder das Mietpreisniveau, kontrolliert werden. Diese Befunde verweisen darauf, dass das bestehende niedrigere Lohnniveau in Ostdeutschland auch die Anspruchslöhne absenkt und damit die Lohnlücke zementiert. Mit Blick auf die politisch und gesellschaftlich gewünschte Angleichung der Löhne zwischen Ost und West stellt dies eine Herausforderung dar." (Autorenreferat, IAB-Doku)

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Brown, Sarah & Karl Taylor (2014): The reservation wage curve. Evidence from the UK. (IZA discussion paper 8519), Bonn, 9 S.

Abstract

"We investigate the relationship between an individuals' reservation wage, i.e. the lowest wage acceptable in order to enter into employment, and unemployment in the local area district. Largely unexplored in the literature this adds to the work which has examined the association between employee wages and unemployment - the 'wage curve'." (Author's abstract, IAB-Doku) ((en))

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Koenig, Felix, Alan Manning & Barbara Petrongolo (2014): Reservation wages and the wage flexibility puzzle. (CEP discussion paper 1319), London, 50 S.

Abstract

"Wages are only mildly cyclical, implying that shocks to labour demand have a larger short-run impact on unemployment rather than wages, at odds with the quantitative predictions of the canonical search and matching model. This paper provides an alternative perspective on the wage flexibility puzzle, explaining why the canonical model can only match the observed cyclicality of wages if the replacement ratio is implausibly high. We show that this failure remains even if wages are only occasionally renegotiated, unless the persistence in unemployment is implausibly low. We then provide some evidence that part of the problem comes from the implicit model for the determination of reservation wages. Estimates for the UK and West Germany provide evidence that reservation wages are much less cyclical than predicted even conditional on the observed level of wage cyclicality. We present evidence that elements of perceived 'fairness' or 'reference points' in reservation wages may address this model failure." (Author's abstract, IAB-Doku) ((en))

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Leppin, Julian S. (2014): The estimation of reservation wages. A simulation-based comparison. In: Jahrbücher für Nationalökonomie und Statistik, Jg. 234, H. 5, S. 603-634. DOI:10.1515/jbnst-2014-0503

Abstract

"This paper examines the predictive power of different estimation approaches for reservation wages. It applies stochastic frontier models for employed persons and the approach from Kiefer and Neumann (1979b) for unemployed persons. Furthermore, the question of whether or not reservation wages decrease over the unemployment period is addressed. This is done by a simulated panel with known reservation wages which uses data from the socio-economic panel as a basis. The comparison of the estimators is carried out by a Monte Carlo simulation. In case of employed persons, the cross-sectional stochastic frontier model shows the best performance. The Kiefer-Neumann approach for unemployed persons is able to predict decreasing reservation wages but the rise of the mean reservation wage in case of a constant simulated reservation wage went undetected. In general, the Kiefer-Neumann approach overestimates the reservation wage." (Author's abstract, IAB-Doku) ((en))

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Stephan, Gesine & Thomas Rhein (2014): Wiedereinstieg in den Arbeitsmarkt: Nicht nur eine Frage der Zeit. In: IAB-Forum H. 2, S. 62-69., 2014-11-27. DOI:10.3278/IFO1402W062

Abstract

Knapp zwei Drittel der Bezieherinnen und Bezieher von Arbeitslosengeld I finden innerhalb von 18 Monaten wieder eine sozialversicherungspflichtige Stelle - der weit überwiegende Teil davon sogar binnen eines halben Jahres. Allerdings nehmen diejenigen, die länger als sechs Monate ohne Beschäftigung waren, häufiger schlechter bezahlte Jobs an als diejenigen, die schneller eine neue Stelle antraten. Zudem stellt sich die Frage, wie stabil die neuen Beschäftigungsverhältnisse sind.