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IZA
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Unemployment Benefits and Unemployment Rates of Low-Skilled and Elder Workers in West Germany: A Search Equilibrium Approach
by
Andrey Launov, Joachim Wolff, Stephan Klasen
(May 2004)
Abstract:
In this paper we investigate whether the extension of the entitlement to unemployment
benefits in the mid 80s can explain the increase in the unemployment rates of unskilled and
elder workers in western Germany. To answer this question we estimate a version of the
Burdett-Mortensen search equilibrium model and analyze how workers’ search behaviour
responded to these reforms. We try both nonparametric and fully-parametric estimation
methods and identify the cases in which the nonparametric approach cannot be applied. We
find that the entitlement reforms are largely responsible for the increase of unemployment
among unskilled workers.
Text: See Discussion Paper No. 1161 
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