Germany's 2005 Welfare Reform: Evaluating Key by Thomas Walter

By Thomas Walter

In January 2005, the German govt enacted a considerable reform of the welfare procedure, the so-called “Hartz IV reform”. This e-book evaluates key features of the reform from a microeconometric standpoint. It investigates no matter if a centralized or decentralized association of welfare management is extra winning to combine welfare recipients into employment. in addition, it analyzes the employment results of an intensified use of gain sanctions and evaluates the effectiveness and potency of the main often assigned lively exertions marketplace courses. The analyses have a spotlight on immigrants, who're hugely over-represented within the German welfare system.​

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Extra resources for Germany's 2005 Welfare Reform: Evaluating Key Characteristics with a Focus on Immigrants

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3% of all welfare recipients in 2005, they formed nearly a quarter of the welfare dependent population in 2009. 1% in 2009. An increasing share of welfare recipients was formed by persons who are employed but whose earnings are insufficient to cover living expenses. While in 2005 about 55% of welfare recipients were unemployed, this figure dropped to less than 44% in 2009. The reasons for this increase in people employed but dependent on welfare have yet to be uncovered (see Bundesagentur f¨ ur Arbeit, 2010b).

Nevertheless, to avoid composition bias, it is necessary to control for individual characteristics. Another similar kind of potential selection concerns the inflow into welfare receipt. 1, UBII recipients have to be able to work for at least 15 hours per week. In determining whether claimants to UBII meet this requirement, welfare agencies possess a considerable degree of leeway. If ability criteria differ systematically between centralized and decentralized welfare agencies, this may result in a different composition of welfare recipients with regard to characteristics such as illness or disability.

Based on comprehensive information on the situation of regional labor markets prior to 2005 (before the reform took place), the authors determine comparable welfare districts across Germany in a microeconometric analysis combining individual and regional data. In a first step, the authors identify regional variables that are, in addition to personal characteristics, relevant to the transition of long-term unemployed individuals into employment. Then, in a second step, the authors use the reduced set of relevant regional variables and apply the distance matching suggested by Zhao (2004) to identify comparable districts in a regional matching procedure.

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