Marginal Employment, Unemployment Duration and Job Match Quality

33 Pages Posted: 19 Jul 2012

See all articles by Marco Caliendo

Marco Caliendo

University of Potsdam; Institute for the Study of Labor (IZA)

Steffen Kuenn

affiliation not provided to SSRN

Arne Uhlendorff

IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2012

Abstract

In some countries including Germany unemployed workers can increase their income during job search by taking up 'marginal employment' up to a threshold without any deduction from their benefits. Marginal employment can be considered as a wage subsidy as it lowers labor costs for firms owing to reduced social security contributions, and increases work incentives due to higher net earnings. Additional earnings during unemployment might lead to higher reservation wages prolonging the duration of unemployment, yet also giving unemployed individuals more time to search for better and more stable jobs. Furthermore, marginal employment might lower human capital deterioration and raise the job arrival rate due to network effects. To evaluate the impact of marginal employment on unemployment duration and subsequent job quality, we consider a sample of fresh entries into unemployment. Our results suggest that marginal employment leads to more stable post-unemployment jobs, has no impact on wages, and increases the job-finding probability if it is related to previous sectoral experience of the unemployed worker. We find evidence for time-varying treatment effects: whilst there is no significant impact during the first twelve months of unemployment, job finding probabilities increase after one year and the impact on job stability is stronger if the jobs are taken up later within the unemployment spell.

Keywords: marginal employment, unemployment duration, job search, employment stability, timing of events model

JEL Classification: J64, C41, C33

Suggested Citation

Caliendo, Marco and Kuenn, Steffen and Uhlendorff, Arne, Marginal Employment, Unemployment Duration and Job Match Quality (April 1, 2012). DIW Berlin Discussion Paper No. 1222. Available at SSRN: https://ssrn.com/abstract=2111967 or http://dx.doi.org/10.2139/ssrn.2111967

Marco Caliendo (Contact Author)

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, 14482
Germany
+49(0)331/9773225 (Phone)
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HOME PAGE: http://www.uni-potsdam.de/en/empwifo/news.html

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Steffen Kuenn

affiliation not provided to SSRN ( email )

Arne Uhlendorff

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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