Do German Welfare‐to‐Work Programmes Reduce Welfare Dependency and Increase Employment?

Abstract. During the last decade, many Western economies reformed their welfare systems with the aim of activating welfare recipients by increasing welfare‐to‐work programmes (WTWP) and job‐search enforcement. We evaluate the short‐term effects of three important German WTWP implemented after a major reform in January 2005 (‘Hartz IV’), namely short training, further training with a planned duration of up to three months and public workfare programmes (‘One‐Euro‐Jobs’). Our analysis is based on a combination of a large‐scale survey and administrative data that is rich with respect to individual, household, agency level and regional information. We use this richness of the data to base the econometric evaluation on a selection‐on‐observables approach. We find that short‐term training programmes, on average, increase their participants' employment perspectives. There is also considerable effect heterogeneity across different subgroups of participants that could be exploited to improve the allocation of welfare recipients to the specific programmes and thus increase overall programme effectiveness.     

Quantifying the risk-sharing welfare gains of social security

The welfare effects of intergenerational risk sharing through a pay-as-you-go social security system that is efficiently indexed to wages or interest rates are quantified. Comparing steady states, there are large welfare gains of being born into an economy with efficient risk sharing as compared to the current U.S. system. Efficient policy involves an increasingly risky net of tax income over the life cycle. When adjustment to steady state is taken into account, the welfare gains largely turn negative. The results are also compared and contrasted to the first best allocation.     

WHY DO EUROPEANS WORK SO LITTLE?*

Market work per person is roughly 10% higher in the United States than in Sweden. However, if we include the work carried out in home production, the total amount of work only differs by 1%. I set up a model and show that differences in policy—mainly taxes—can account for the discrepancy in both labor supply and home production between Sweden and the United States. These results are independent of the elasticity of labor supply.     

Convergence in the EU

The EU has long viewed economic and institutional convergence as important goals, but the results thus far have been decidedly mixed, and there remain several open questions: How exactly should convergence be defined? How much convergence is necessary? What steps can be taken to improve convergence in the EU, and how can success be defined? Finally, how much convergence can be achieved by improving the economic performance in underperforming regions, and how can convergence in the form of harmonisation towards lower welfare levels be avoided?     

Management by objectives – an effective tool for teamwork?

In recent years many companies have introduced self-regulatory teamwork requiring changes in leadership behaviour and systems as well. Consequently a renewed interest has arisen in management by objectives (MBO) as a means for leading self-regulating teams. But how do MBO systems work and how effective are they? The MBO system of a company in the construction supply industry was analysed. This company had implemented MBO at team level five years ago. In order to explore the mechanisms and effects of MBO at team level a model for group goal setting was tested. One hundred and seventy-six employees in twenty-six teams participated in the study, but only twenty-one groups having objective productivity data were included in the analyses at team level. Group goal commitment and group goals moderated by task interdependence are supposed to influence group processes as a mediating variable for group effectiveness. Results do not consistently support this model. Group goals and goal commitment predict group productivity and job satisfaction but group processes mediate only the relationship to job satisfaction. The moderating effect of task interdependence could not be supported. The consequences for developing a model for MBO at team level and implementing effective MBO systems are discussed.     

Causality in the Social Sciences: a structural modelling framework

Quality & Quantity - There is no unified theory of causality in the sciences and in philosophy. In this paper, we focus on a particular framework, called structural causal modelling (SCM), as...     

The performance of estimators based on the propensity score

We investigate the finite sample properties of a large number of estimators for the average treatment effect on the treated that are suitable when adjustment for observed covariates is required, like inverse probability weighting, kernel and other variants of matching, as well as different parametric models. The simulation design used is based on real data usually employed for the evaluation of labour market programmes in Germany. We vary several dimensions of the design that are of practical importance, like sample size, the type of the outcome variable, and aspects of the selection process. We find that trimming individual observations with too much weight as well as the choice of tuning parameters are important for all estimators. A conclusion from our simulations is that a particular radius matching estimator combined with regression performs best overall, in particular when robustness to misspecifications of the propensity score and different types of outcome variables is considered an important property.     

Do Long‐Term Unemployed Workers Benefit from Targeted Wage Subsidies?

We evaluate a wage subsidy program that is targeted at long‐term unemployed workers in Germany. We use an alternative identification procedure compared to empirical studies conducted so far. Exploiting the particular program regulations and large administrative data we estimate the impact of program availability using a regression discontinuity framework. Our results suggest no significant impact of the availability of the subsidy on labor market outcomes of the target group. Even though our analysis lacks some statistical power, our findings do not support the substantial positive effects obtained from matching studies. As our approach does not require observability of all drivers of selection, previous empirical studies justifying government expenditures on wage subsidies based on matching methods should be reconsidered.     

Risky choices and solidarity: disentangling different behavioural channels

Experimental Economics - We investigate whether informal support is sensitive to the extent to which individuals can influence their income risk exposure by opting into risk. In a laboratory...