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Unemployment Benefit and Wages: The Impact of the Labor Market Reform in Germany on (Reservation) Wages
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Abstract
In this paper, we contribute to the literature on the impact of the unemployment benefit on (reservation) wages. We use the German BA-Employment Panel (2008) to identify the effect of a reduced unemployment benefit due to the labor market reform of 2005 in Germany. Using this unique experiment, we find strong evidence that a lower unemployment benefit has an adverse effect on wages.Unemployment benefit, reservation wages, wages.